VNUE, Inc S-1, filed Jun 23, 2021
VNUE, Inc. (RDCT)
As filed with the Securities and Exchange Commission on June 23, 2021
Registration No. _________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
| VNUE, INC. |
| (Exact Name of Registrant as Specified in Its Charter) |
| Nevada |
| 7829 |
| 98-0543851 |
| (State or jurisdiction of |
| (Primary Standard Industrial |
| (I.R.S. Employer |
| incorporation or organization) |
| Classification Code Number) |
| Identification No.) |
104 West 29th St, 11th floor, New York, NY 10001
Telephone: (833) 937-5493
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Corporate Services Center, Inc.
5605 Riggins Court, Suite 200
Reno, Nevada 89502
Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer: | ☐ | Accelerated filer: | ☐ |
| Non-accelerated filer: | ☐ | Smaller reporting company: | ☒ |
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| Emerging Growth Company: | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act ☐
CALCULATION OF REGISTRATION FEE
| Title of Each Class of Securities to be Registered |
| Proposed Maximum Aggregate Offering Price(1)(2) |
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| Shares of common stock |
| $ | 2,500,000 |
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| $ | 272.75 |
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| (1) | Pursuant to Rule 416(a) under the Securities Act of 1933, as amended (the “Securities Act”) the registrant is also registering an indeterminate number of additional shares of common stock that may be issued as a result of stock splits, stock dividends or similar transactions. |
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| (2) | Consists of up to 250,000,000 shares of common stock to be offered by the Company in the Offering. As of June 23, 2021, the Company had 1,108,423,770 shares of common stock in the public float and 1,269,633,963 shares of common stock outstanding. The 250,000,000 shares being registered represent approximately 22% of the shares in the public float as of June 23, 2021. Assuming all of these shares are sold, the Company’s total number of issued and outstanding shares of common stock will be 1,019,633,963 calculated on the total number of shares issued and outstanding on June 23, 2021, of 1,269,633,963. The total number of registered shares will then represent 24% of the issued and outstanding shares. |
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.
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The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell, nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion dated June 23, 2021
PRELIMINARY PROSPECTUS
VNUE, INC.
250,000,000 shares of common stock
This Prospectus relates to the sale of 250,000,000 shares of common stock, par value $0.0001, of VNUE, Inc., a Nevada corporation (referred to herein as the “Company”), by the Company on a “best efforts” basis through its management to be sold at a fixed price to be determined upon effectiveness (the “Offering”). The total proceeds from the Offering will not be escrowed or segregated but will be available to the Company immediately. There is no minimum amount of shares of Common Stock required to be purchased, and, therefore, the total proceeds received by the Company might not be enough to sustain continued operations. No commission or other compensation related to the sale of the shares will be paid. For more information, see the sections titled “Plan of Distribution” and “Use of Proceeds” herein.
As of June 23, 2021, the Company had 1,108,423,770 shares of common stock in the public float and 1,269,633,963 shares of common stock outstanding. The 250,000,000 shares being registered represent approximately 22% of the shares in the public float as of June 23, 2021. Assuming all of these shares are sold, the Company’s total number of issued and outstanding shares of common stock will be 1,019,633,963, calculated on the total number of shares issued and outstanding on June 23, 2021, of 1,269,633,963. The total number of registered shares will then represent 24% of the issued and outstanding shares.
Our Common Stock is quoted on the OTC Pink under the symbol “VNUE”. On June 18, 2021, the closing price per share of our Common Stock as quoted on the OTC Pink was $0.014 per share.
Investment in our common stock involves risk. See “Risk Factors” contained in this prospectus. You should carefully read this prospectus, together with the documents we incorporate by reference, before you invest in our common stock.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or the accuracy of this prospectus. Any representation to the contrary is a criminal offense.
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The date of this prospectus is June 23, 2021.
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| Certain Relationships and Related Transactions, and Corporate Governance |
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COMMONLY USED DEFINED TERMS
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| ● | Unless the context provides otherwise, “we,” “us,” “our company,” “our,” “the Company” and “VNUE” is to VNUE, Inc., a Nevada company.
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| ● | All references to “U.S. dollars,” “dollars,” “USD” or “$” are to the legal currency of the United States; and;
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| ● | “shares”, “Shares” are to the shares of the common stock of VNUE Group, Inc, par value $0.0001 per share;
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| ● | “Websites” are to our websites at VNUE.com. |
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| Table of Contents |
You should rely only on the information contained in this prospectus or contained in any prospectus supplement or free writing prospectus filed with the Securities and Exchange Commission (the “SEC”). We have never authorized anyone to provide you with additional information or information different from that contained in this prospectus filed with the SEC. We are offering to sell, and seeking offers to buy, shares of our Common Stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of shares of our Common Stock. Our business, financial condition, results of operations and prospects may have changed since that date.
For investors outside the United States: We have never done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of Common Stock and the distribution of this prospectus outside the United States.
As used in this prospectus, unless otherwise designated, the terms “we,” “us,” “our,” the “Company,” “VNUE” and “our company” refer to VNUE, Inc. a Nevada corporation, and its wholly-owned subsidiary described below.
This summary highlights information contained elsewhere in this prospectus. Before making an investment decision, you should read the entire prospectus carefully, including the sections entitled “Risk Factors,” beginning on page 5 and “Cautionary Statement Regarding Forward-Looking Statements,” beginning on page 12.
About VNUE
VNUE, Inc. was originally incorporated as Tierra Grande Resources Inc., (“Tierra Grande”) in Nevada on April 4, 2006. On May 29, 2015, Tierra Grande entered into an Agreement and Plan of Merger (“Merger Agreement”) with VNUE, Inc., resulting in VNUE, Inc. becoming Tierra Grande’s wholly-owned operating subsidiary. Pursuant to the Merger Agreement Tierra Grande changed its name to VNUE, Inc. (the “Company”).
Overview of Our Current Business
We are a music technology company that utilizes our platforms to record live concerts, and then sell that content to consumers. We make the content we record available to the set.fm platform, as well as our website, immediately after a live show is finished. Our technology helps artists and record labels generate alternative income from the recorded content. We also offer high end collectible products such as CDs, USB drives and laminates, that feature our fully mixed and mastered live concert content.
We currently have two products:
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| · | Set.fm™ / DiscLive Network™ - Our consumer app platform allows customers to download and purchase, via their individual mobile device, the concert they just attended. There are also physical collectible products which are recorded and sold at shows as well as online through the Company’s exclusive partner DiscLive Network™. The app itself is free to download and allows for in app purchases regarding the content. (Currently, this is the only platform that generates any revenue for the Company.) |
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| · | Soundstr™ - a comprehensive music identification and rights management Cloud platform that we are developing, when fully deployed, can accurately track and audit public performances of music, creating a more transparent ecosystem for general music licensing and associated royalty payments, which will help ensure the correct stakeholders are compensated through the use of our “big data” collection. |
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While Set.fm™ and Soundstr™ are proprietary marks of the Company, DiscLive, and its related marks and names are not owned by the Company and are owned and utilized by RockHouse Live Media Productions, Inc. The Company has not filed any formal trademark applications relating to Set.fm™ with the United States US Patent and Trademark Office but has been using these marks openly since 2017 and claims common law rights to them.
The Company currently only generates revenue from Set.fm and from DiscLive by (a) recording the audio of live concerts and then selling the content “instantly” through its set.fm website, as well as the IOS Set.fm mobile application, and (b) selling content on physical products such as CDs, which are burned on-site where customers can purchase them. Our customers are fans of live music and the bands which we record.
Customers want to “take home” their experience of the concerts they attend. Our Company enters into agreement with certain bands and artists, and record labels if a particular artist under contract with the label. Our teams then follow that artist or band while they are on tour and record every show on that tour. Our Company uses its own recording and sound equipment while recording concerts.
As we partner with both artists and labels, we market our services on their websites, their social media platforms, their mailing lists, as well as our own websites and social networks. Furthermore, partnerships, with companies similar to Ticketmaster, allow us to market to customers when they buy tickets to see certain artists in concert.
On January 9, 2020, the Company entered into an artist agreement (the “Artist Agreement”) with recording and performance artist, Matchbox Twenty (“MT”) to record its 2020 tour and sell limited edition double CD sets, download cards, and digital downloads. Due to COVID-19, the tour has been rescheduled to May 2022.
We are a relatively new company and our independent auditors have raised substantial doubts as to our ability to continue without significant additional financing.
Our future operations may be dependent on our ability to secure additional financing. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will likely be required to curtail our marketing and development plans and possibly cease our operations.
We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.
Our liquidity may be negatively impacted by the significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance.
Our Revenue Model
The live music and entertainment space are constantly searching for ways to generate revenue. Music licensing and royalties are particular “hot button” issues in the industry. We have developed solutions that create new revenue streams that simultaneously help to protect the rights of the artists. Our business model helps to ensure that creators and artists are properly compensated for their work.
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Employees
We currently have 1 full-time and 5 part-time employees. We also currently engage independent contractors in the areas of accounting, legal and auditing services, corporate finance, as well as marketing and business development. The remuneration paid to our officers and directors will be more completely described elsewhere in our audited financial statements. We expect to double the number of employees over the next 12-month period with the capitalization needed and obtained through this S1. We do and will continue to outsource contract employment as needed.
Our Industry
The live music and entertainment space is constantly searching for new monetization outlets. We believe that we have developed solutions that create new revenue streams.
Since 2003, half of the nation’s CD and record stores have closed. Annual data regarding downloads was not even collected until 2004, yet in 2014 it accounted for 46% of total music industry sales. For most artists, digital sales and streaming revenues have not replaced the income they earn from recording and publishing. However, streaming revenues create an additional income stream.
A recent study on musicians’ online revenue streams, featured on www.lifeisbeautiful.com, suggests that the average payment to an artist is $0.0011 net per stream. Artists that have their content on our Set.fm mobile app receive 30% of the net revenue generated from their specific music. Live music shows are seeing significant new commercial and experiential trends driven by technology. More musicians engage directly with their fans via their web presence —selling songs and even allowing them to vote on touring venues – bypassing the traditional record labels and ticket services.
For an industry with constantly evolving trends, music's live events have remained surprisingly static since the 1970’s. VNUE employs a unique platform that provides music lovers with an exciting new way to experience the live music events they attend. With Set.fm and DiscLive, the customer can purchase the songs they just heard at the concert, in excellent quality, mixed and mastered, and take that unique magical moment home, to be enjoyed for a lifetime.
Almost everyone has a smart phone present with them when they attend live events. The widespread use of these mobile devices is changing the ways customers behave before, during and after a live music event. Customers use their devices to search for live music events, buy tickets, and share their experiences.
The rise of the mobile internet and smart phones has, in recent years, begun shaping and changing the live music concert experience for many audience members. The ability to preserve and share moments of the show as they happen—to take photos and upload them instantly, to capture videos is a growing trend. Everyone has a cell phone.
According to a Nielsen report, as of August 2019, the annual average consumer music spending in the U.S. is over $150 million, of which 54% of that spending is on live music events.
Our Company reimagines the live event experience. We connect consumers, artists and venues with the VNUE Set.fm app as well as our physical, collectible products. We create promotional and social opportunities that enhance the live concert experience. We offer certain venues a partnership to help with their sales, and artists can get added revenue with their concerts. Our app allows artists to connect with their fans at a different level.
Our technology enhances our customer’s sensory experience at live events. It creates a natural extension of earlier concert culture allowing our customers to now have a piece of the live experience and own it forever.
Competition
Any entity that offers, or has the ability to offer, lice music recordings that can be uploaded to an app-based platform is considered a direct competitor of our Company, regardless of whether the end-user is required to pay for those services or not. This also includes applications that allow users engage in streaming activities and download musical content, such as Amazon, Apple, SoundCloud, iTunes, etc.
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Competitive Strengths
We believe our expertise and experience in “Instant Live” content production and distribution is a competitive strength that differentiates us from our competitors.
VNUE’s team members have been involved in the business of instant live content since 2003. The Company’s CEO has vast experience with this concept and how to commercialize it. Over the years, the Company has continued to develop the processes and methodologies it uses to gain partnerships with certain artists and labels which gives us a competitive advantage in live content industry. We plan to continue to develop our current business model as well as introduce new innovative and immersive software features to consumers.
Intellectual Property
VNUE has pending patents for our Soundstr™ technology and expects to file more related patents around the Soundstr™ platform, as well as Set.fm™. This will further strengthen the company as a leader in music technology and will allow us to have a competitive edge against those that may emerge as the company continues to execute.
We have patent-pending technology, USPTO Application US 2017/0316089, “System and Method for Capturing, Archiving and Controlling Content in a Performance Venue” which relates to our Soundstr™ technology.
Our Strategy for Growth
Key elements of our growth strategy include:
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| · | Continued rollout of the live recording business and further improvement to our software platforms. |
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| · | Rollout of the Soundstr technology, which is a key part of our Company’s strategy going forward. Soundstr is in a space called “Music Recognition Technology,” (MRT), that is a relatively new area of live music and addresses a large market with no known, established solution for recognizing music and then tracking this information in an automated fashion. By leveraging technology and automation, Soundstr will be in a position to help the company build a large database of music performed in public spaces, such as bars, restaurants, gyms, radio, and other businesses. |
Summary of Significant Risk Factors
Investing in our shares involves significant risks. You should carefully consider all of the information in this prospectus before making an investment in our shares. Below please find a summary of the significant risks we face, organized under relevant headings. These risks are discussed more fully in the section titled “Risk factors.”
Corporate Information
Our common stock offered in this prospectus is quoted on the OTC Pink under the symbol “VNUE”.
Our principal executive offices are located at 104 W. 29th Street, 11th Floor, New York, NY 10001, and our telephone number is 833-937-5493. Our website is VNUE.com. Information contained in, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus.
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THE OFFERING
| Issuer |
| VNUE, INC.
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| Securities Being Offered |
| 250,000,000 shares of common stock.
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| Offering Price |
| $
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| Common Stock Outstanding Before this Offering
Newly Issued Common Stock Being Registered Pursuant to the Offering. 250,000,000 |
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1,069,633,963 |
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| Common Stock Outstanding After this Offering
Common Stock In Public Float Before The Offering |
| 1,019,633,963
1,108,423,770 |
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| Use of Proceeds
Offering Period |
| We estimate that we will receive net proceeds of approximately $[ ] from our sale of Shares in this offering, after deducting underwriting discounts and estimated offering expenses payable by us. We intend to use the net proceeds of this offering to provide funding for service, sales, marketing efforts, strategic acquisitions and related expenses, and general working capital. See “Use of Proceeds.”
The Offering will conclude upon such time as all the common stock has been sold pursuant to the registration statement, or 24 months after the effective date. |
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| Risk Factors |
| Please read “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in the securities offered in this prospectus. |
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| Transfer Agent |
| ClearTrust, LLC |
Unless we indicate otherwise, all information in this prospectus is based on 1,269,633,963 shares of common stock issued and outstanding as of June 23, 2021, and excludes shares issuable upon conversion of convertible notes and shares issuable upon the conversion of outstanding warrants and options.
Risks Related to our Business
If we fail to keep up with industry trends or technological developments, our business, results of operations and financial condition may be materially and adversely affected.
The live music content industry is rapidly evolving and subject to continuous technological changes. Our success will depend on our ability to keep up with the changes in technology and user behavior resulting from new developments and innovations. For example, as we provide our product and service offerings across a variety of mobile systems and devices, we are dependent on the interoperability of our services with popular mobile devices and mobile operating systems that we do not control, such as Android and iOS. If any changes in such mobile operating systems or devices degrade the functionality of our services or give preferential treatment to competitive services, the usage of our services could be adversely affected.
Technological innovations may also require substantial capital expenditures in product development as well as in modification of products, services or infrastructure. We cannot assure you that we can obtain financing to cover such expenditure. If we fail to adapt our products and services to such changes in an effective and timely manner, we may suffer from decreased user base, which, in turn, could materially and adversely affect our business, financial condition and results of operations.
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Rapidly evolving technologies could cause demand for our products to decline or could cause our products to become obsolete.
Current or future competitors may develop technological or product innovations that address live music content in a manner that is, or is perceived to be, equivalent or superior to our products. In the technology market in particular, innovative products have been introduced which have the effect of revolutionizing a product category and rendering many existing products obsolete. If competitors introduce new products or services that compete with or surpass the quality or the price/performance of our products, we may be unable to attract and retain users or to maintain or increase revenues from our users. We may not anticipate such developments and may be unable to adequately compete with these potential solutions. As a result of these or similar potential developments, in the future it is possible that competitive dynamics in our market may require us to reduce prices for our paid for products, which could harm our net revenues, gross margin and operating results or cause us to incur losses.
Our business depends on our users having continued and unimpeded access to the Internet. Companies providing access to the Internet may be able to block or degrade our calls, or block access to our website or charge us or our users additional fees for our products.
All of our users rely on open, unrestricted access to the Internet to use our products. If they have limited, restricted or no access at all to the Internet, or their connection to the Internet is interrupted or disturbed, they may be less likely to use our products as a result.
Some of these internet providers have stated that they may take measures that could increase the cost of customers’ use of our products by restricting or prohibiting the use of their lines or access points to the Internet for our products, by filtering, blocking, delaying, or degrading the packets of data used to transmit our communications, and by charging increased fees to our users for access to our products.
Some Internet access providers have additionally, or alternatively, contractually restricted their customers’ access to Internet communications products through their terms of service. Customers of these and other Internet access providers may not be aware that technical disruptions or additional tariffs are the act of other parties, which could harm our brand. Even if customers understand that we are not the source of such disruptions, they may be less likely to use our products as a result.
In the United States, the European Union and other jurisdictions, regulatory authorities are in the process of examining the adoption of “network neutrality” policies, which aim to treat all Internet traffic equally, and developing or considering laws and regulations to codify acceptable behaviors on the part of network operators and access providers when providing consumers and businesses with access to the Internet. Different regulatory authorities have different approaches to this policy area both from a substantive and procedural perspective. Any failure on the part of regulatory authorities to protect the accessibility of the Internet to all, or any particular category of, Internet subscribers, or their failure to protect the delivery on a non-discriminatory basis of user communications over the Internet, regardless of type or service, could harm our results of operations and prospects.
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Our business depends on the continued reliability of the Internet infrastructure.
If Internet service providers and other third parties providing Internet services have outages or deteriorations in their quality of service, our customers will not have access to our products or may experience a decrease in the quality of our products.
Furthermore, as the rate of adoption of new technology increases, the networks on which our products rely in certain countries may not be able to sufficiently adapt to the increased demand for their products and services. Frequent or persistent interruptions could cause current or potential users to believe that our systems are unreliable, leading them to switch to our competitors or to avoid our products, and could permanently harm our reputation and brands.
We cannot control internet-based delays and interruptions, which may negatively affect our customers and thus our revenues.
Any delay or interruption in the services by these third parties service providers could result in delayed or interrupted service to our customers and could harm tour business. Accordingly, we could be adversely affected if such third party service providers fail to maintain consistent and reliable services, or fail to continue to make these services available to us on economically acceptable terms, or at all. These suppliers could also be adversely impacted by the COVID-19 pandemic, which could affect their ability to deliver their services to our customers in a satisfactory manner, or at all.
Our failure to adopt certain corporate governance procedures may prevent us from obtaining a listing on a national securities exchange.
We do not have an audit, compensation or nominating and corporate governance committee. The functions such committees would perform are performed by the board as a whole. Consequently, there is a potential conflict of interest in board decisions that may adversely affect our ability to become a listed security on a national securities exchange and as a result adversely affect the liquidity of our Common Stock.
We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate intellectual property rights held by third parties. We have not but in the future may be, subject to legal proceedings and claims relating to the intellectual property rights of others. There could also be existing intellectual property of which we are not aware that our products may inadvertently infringe. We cannot assure you that holders of intellectual property purportedly relating to some aspect of our technology or business, if any such holders exist, would not seek to enforce such intellectual property against us in the United States, or any other jurisdictions. If we are found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. In addition, we may incur significant expenses, and may be forced to divert management’s time and other resources from our business and operations to defend against these infringement claims, regardless of their merits. Successful infringement or licensing claims made against us may result in significant monetary liabilities and may materially disrupt our business and operations by restricting or prohibiting our use of the intellectual property in question, and our business, financial position and results of operations could be materially and adversely affected.
Digital piracy continues to adversely impact our business.
A substantial portion of our revenue comes from the distribution of music which is potentially subject to unauthorized consumer copying and widespread digital dissemination without an economic return to us, including as a result of “stream-ripping.” In its Music Listening 2019 report, IFPI surveyed 34,000 Internet users to examine the ways in which music consumers aged 16 to 64 engage with recorded music across 21 countries. Of those surveyed, 23% used illegal stream-ripping services, the leading form of music piracy. Organized industrial piracy may also lead to decreased revenues. The impact of digital piracy on legitimate music revenues and subscriptions is hard to quantify, but we believe that illegal file sharing and other forms of unauthorized activity, including stream manipulation, have a substantial negative impact on music revenues. If we fail to obtain appropriate relief through the judicial process or the complete enforcement of judicial decisions issued in our favor (or if judicial decisions are not in our favor), if we are unsuccessful in our efforts to lobby governments to enact and enforce stronger legal penalties for copyright infringement or if we fail to develop effective means of protecting and enforcing our intellectual property (whether copyrights or other intellectual property rights such as patents, trademarks and trade secrets) or our music entertainment-related products or services, our results of operations, financial position and prospects may suffer.
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Risks Related to our Common Stock
Since we are traded on the OTC Pink Market, an active, liquid trading market for our common stock may not develop or be sustained. If and when an active market develops the price of our common stock may be volatile.
Presently, our common stock is traded on the OTC pink sheets and the closing price of our stock on June 21, 2021 is $0.014. Presently there is limited trading in our stock and in the absence of an active trading market investors may have difficulty buying and selling or obtaining market quotations, market visibility for shares of our common stock may be limited, and a lack of visibility for shares of our common stock may have a depressive effect on the market price for shares of our common stock.
The lack of an active market impairs your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares.
Trading in stocks quoted on the Pink Markets is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. The securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of shares of our common stock. Moreover, the pink sheets is not a stock exchange, and trading of securities is often more sporadic than the trading of securities listed on a quotation system like Nasdaq or a national stock exchange like the NYSE. Accordingly, stockholders may have difficulty reselling any shares of common stock.
There is no assurance that we will be able to pay dividends to our shareholders, which means that you could receive little or no return on your investment.
Payment of dividends from our earnings and profits may be made at the sole discretion of our board of directors. There is no assurance that we will generate any distributable cash from operations. Our board may elect to retain cash for operating purposes, debt retirement, or some other purpose. Consequently, you may receive little or no return on your investment.
Our shares will be subordinate to all of our debts and liabilities, which increases the risk that you could lose your entire investment.
Our shares are equity interests that will be subordinate to all of our current and future indebtedness with respect to claims on our assets. In any liquidation, all of our debts and liabilities must be paid before any payment is made to our shareholders. The amount of any debt financing we incur creates a substantial risk that in the event of our bankruptcy, liquidation or reorganization, we may have no assets remaining for distribution to our shareholders after payment of our debts.
Our Board of Directors may authorize and issue shares of new classes of stock that could be superior to or adversely affect you as a holder of our common stock.
Our board of directors has the power to authorize and issue shares of classes of stock, including preferred stock that have voting powers, designations, preferences, limitations and special rights, including preferred distribution rights, conversion rights, redemption rights and liquidation rights without further shareholder approval which could adversely affect the rights of the holders of our common stock. In addition, our board could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing common stockholders.
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Any of these actions could significantly adversely affect the investment made by holders of our common stock. Holders of common stock could potentially not receive dividends that they might otherwise have received. In addition, holders of our common stock could receive less proceeds in connection with any future sale of the Company, whether in liquidation or on any other basis.
Shares eligible for future sale may adversely affect the market price of our common stock, as the future sale of a substantial amount of outstanding common stock in the public marketplace could reduce the price of our common stock.
The market price of our shares could decline as a result of sales of substantial amounts of our shares in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings of our common stock.
If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.
The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on such company’s internal controls over financial reporting in its annual report, which contains management’s assessment of the effectiveness of internal controls over financial reporting.
Our reporting obligations as a public company place a significant strain on our management and operational and financial resources and systems. Effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting may result in the loss of investor confidence in the reliability of our financial statements, which in turn may harm our business and negatively impact the trading price of our stock. Furthermore, we anticipate that we will continue to incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.
We may, in the future, issue additional common shares, which would reduce investors’ percent of ownership and may dilute our share value.
Our Articles of Incorporation authorizes the issuance of 2,000,000,000 shares of common stock. We currently have 1,211,495,162 shares of common stock issued and outstanding. The future issuance of common stock will result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors and might have an adverse effect on any trading market for our common stock.
There is a limited market for our common stock, which may make it difficult for holders of our common stock to sell their stock.
Our common stock currently trades on the OTC Pink Markets under the symbol “VNUE” and currently there is no trading in our common stock or current information regarding our company. Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders may be able to sell our common stock. Further, many brokerage firms will not process transactions involving low price stocks, especially those that come within the definition of a “penny stock.” If we cease to be quoted, holders of our common stock may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of our common stock, and the market value of our common stock would likely decline.
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The trading price of our Common Stock is likely to be volatile, which could result in substantial losses to investors.
The trading price of our common stock is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, including the performance and fluctuation of the market prices of other companies with business operations located outside of the United States. In addition to market and industry factors, the price and trading volume for our common stock may be highly volatile for factors specific to our own operations, including the following:
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Any of these factors may result in large and sudden changes in the volume and price at which our common stock will trade.
In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of our management's attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.
We are subject to be the penny stock rules which will make shares of our common stock more difficult to sell.
We are subject now and, in the future, may continue to be subject to the SEC’s “penny stock” rules if our shares of common stock sell below $5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation.
In addition, the penny stock rules require that prior to a transaction, the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for shares of our common stock. As long as our shares of common stock are subject to the penny stock rules, the holders of such shares of common stock may find it more difficult to sell their securities.
The sale or availability for sale of substantial amounts of our common stock could adversely affect their market price.
Sales of substantial amounts of our common stock in the public market after the filing of this Form S-1, or the perception that these sales could occur, could adversely affect the market price of our common stock and could materially impair our ability to raise capital through equity offerings in the future. Shares held by our existing shareholders may be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the Securities. We currently have 1,211,495,162 shares of common stock outstanding, with approximately 24.6% of the shares being held by affiliates. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our common stock.
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Because we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of our common stock for return on your investment.
We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our common stock as a source for any future dividend income.
Our board of directors has complete discretion as to whether to distribute dividends, Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our common stock will likely depend entirely upon any future price appreciation of our common stock. There is no guarantee that our common stock will appreciate in value, or even maintain the price at which you purchased the common stock. You may not realize a return on your investment in our common stock and you may even lose your entire investment in our common stock.
Short sellers of our stock may be manipulative and may drive down the market price of our common stock.
Short selling is the practice of selling securities that the seller does not own but rather has borrowed or intends to borrow from a third party with the intention of buying identical securities at a later date to return to the lender. A short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is therefore in the short seller’s interest for the price of the stock to decline, some short sellers publish, or arrange for the publication of, opinions or characterizations regarding the relevant issuer, its business prospects and similar matters calculated to or which may create negative market momentum, which may permit them to obtain profits for themselves as a result of selling the stock short. Issuers whose securities have historically had limited trading volumes and/or have been susceptible to relatively high volatility levels can be particularly vulnerable to such short seller attacks.
The publication of any such commentary regarding us by a short seller may bring about a temporary, or possibly long term, decline in the market price of our common stock. No assurances can be made that we will not become a target of such commentary and declines in the market price of our common stock will not occur in the future, in connection with such commentary by short sellers or otherwise.
Risks Related to the Offering
Our existing stockholders may experience significant dilution from the sale of our common stock.
The sale of our common stock in this Offering may have a dilutive impact on our shareholders. As a result, the market price of our common stock could decline. If our stock price decreases, then our existing shareholders would experience greater dilution for any given dollar amount raised through the Offering.
The perceived risk of dilution may cause our stockholders to sell their shares, which may cause a decline in the price of our common stock. Moreover, the perceived risk of dilution and the resulting downward pressure on our stock price could encourage investors to engage in short sales of our common stock. By increasing the number of shares offered for sale, material amounts of short selling could further contribute to progressive price declines in our common stock.
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There could be unidentified risks involved with an investment in our securities.
The foregoing risk factors are not a complete list or explanation of the risks involved with an investment in the securities. Additional risks will likely be experienced that are not presently foreseen by us. Prospective investors must not construe this the information provided herein as constituting investment, legal, tax or other professional advice. Before making any decision to invest in our securities, you should read this entire Prospectus and consult with your own investment, legal, tax and other professional advisors. An investment in our securities is suitable only for investors who can assume the financial risks of an investment in us for an indefinite period of time and who can afford to lose their entire investment. We make no representations or warranties of any kind with respect to the likelihood of the success or the business of our Company, the value of our securities, any financial returns that may be generated or any tax benefits or consequences that may result from an investment in us.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon our current assumptions, expectations and beliefs concerning future developments and their potential effect on our business. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “approximately,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although the absence of these words does not necessarily mean that a statement is not forward-looking. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements.
We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this prospectus and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.
All forward-looking statements speak only as of the date of this prospectus. We undertake no obligation to update any forward-looking statements or other information contained herein. Shareholders and potential investors should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements in this report are reasonable, we cannot assure stockholders and potential investors that these plans, intentions or expectations will be achieved.
These forward-looking statements represent our intentions, plans, expectations, assumptions `and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Considering these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. All subsequent written and oral forward-looking statements concerning other matters addressed in this prospectus and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to herein.
Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
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THE OFFERING
This Prospectus relates to the sale of 200,000,000 shares of common stock, par value $0.0001, of the Company at a fixed price of $[ ]. This Offering will terminate 24 months after commencement. We are offering the shares on a self-underwritten “best efforts” basis directly through our management. There is no minimum amount of shares required to be purchased, and the total proceeds received by us might not be enough to continue. No commissions or other compensation related to the sale of the shares will be paid. For more information, see the section titled “Plan of Distribution” and “Use of Proceeds” herein.
We estimate the net proceeds to us from this Offering will be approximately $[ ], based on an assumed initial offering price of $[ ], per share, after deducting estimated offering expenses payable by us.
We anticipate that the net proceeds of the Offering will be used primarily to execute our business plan as follows: $ for general working capital, and $__ remaining in cash reserves. Additionally, proceeds will be used for paying other general and administrative expenses associated with this offering, and paying general and administrative expenses associated with being a public company, such as accounting, auditing, transfer agent, EDGAR filing, and legal expenses. In the event that we sell less than the maximum shares offered in the Offering, our first priority is to pay fees associated with registration of our stock and general working capital. The following table summarizes how we anticipate using the gross proceeds of the Offering, depending upon whether we sell 100%, 75%, 50%, or 25% of the shares being offered in the Offering:
The Company anticipates that the estimated $[ ] gross proceeds from the offering would enable it to expand operations, enable further research and development of our technology, and fund its other capital needs for the next fiscal year. In the event that the offering is not completed, the Company will likely be required to seek additional financing as the Company needs a minimum of approximately $[ ] in gross proceeds to implement its business plan and support its operations over the next twelve months. There can be no assurance that additional financing will be available when needed, and, if available, that it will be on terms acceptable to the Company.
DETERMINATION OF OFFERING PRICE
The shares for sale by the Company in the Offering of 250,000,000 shares will be sold at a fixed price of [ ].
Market Price for our Common Stock
There is a limited public market for our common shares. Our common shares are quoted on the OTC Pink under the symbol “VNUE”. Trading in stocks quoted on the OTC Pink is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects. We cannot assure you that there will be a market in the future for our common stock.
OTC Pink securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTC Pink securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Pink issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.
Our common stock became eligible for quotation on the OTC Pink on ____. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
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Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders
On June 23, 2021, there were 216 holders of record of our Common Stock. The number of record holders does not include an indeterminate number of stockholders whose shares are held by brokers in street name.
Dividend Policy
We have never declared or paid any cash dividends on our common stock. We intend to retain future earnings, if any, to finance the expansion of our business. As a result, the Company does not anticipate paying any cash dividends in the foreseeable future.
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:
1. We would not be able to pay our debts and they become due in the usual course of business; or
2. Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
Rule 10B-18 Transactions
None.
Just prior to the Offering there are 1,269,633,963 common shares outstanding. The 250,000,000 shares of common stock of the Company being offered in the Offering represent a dilution event to common stockholders that will result in a new total for outstanding and issued common shares of 1,019,633,963.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
VNUE, Inc. was originally incorporated as Tierra Grande Resources Inc. in Nevada on April 4, 2006. On May 29, 2015, Tierra Grande entered into a Merger Agreement with VNUE, Inc., resulting in VNUE, Inc. becoming Tierra Grande’s wholly-owned operating subsidiary. Pursuant to the Merger Agreement Tierra Grande changed its name to VNUE, Inc.
VNUE was founded with the vision of creating a collective network of connected venues that empower and assist bands, artists, and entertainers. Our technology allows our consumers to monetize their performances in the venues where they perform using mobile technologies, leveraging teams that record concerts, and making that content available through our technology and technology partners.
In 2014, VNUE acquired Lively LLC, a Seattle based music technology company and direct-to-fan mobile platform. This platform connected artists, fans, and brands together by capturing live performances. In May 2016, Zach Bair, our Company’s CEO, joined VNUE. He and his team determined that the Lively intellectual property (“IP”), although valuable, had not been fully developed to the extent that it could be deployed with major recording artist clients. The Company set out to build and acquire other technologies which would help the Company realize its goals more fully.
DiscLive™ Exclusive License
On July 10, 2017, VNUE entered into a licensing agreement (“Licensing Agreement”) with RockHouse Live Media Productions, Inc., DBA “DiscLive” or “DiscLive Network” (“DiscLive”) (DiscLive and related marks indicated herein are marks utilized by DiscLive and the Company disclaims rights to those names or marks). This Agreement provided VNUE with an exclusive license from DiscLive, for three years unless earlier terminated under the Agreement, for the use of all DiscLive’s assets, including but not limited to the DiscLive brand, website (including eCommerce platform), intellectual property, inventory, equipment and trade secrets. DiscLive received a license fee equal to five percent (5%) of any sales derived from the sale and use of the products and services by the Company. DiscLive is controlled by our Chief Executive Officer, Mr. Bair. On March 19, 2021, the Licensing Agreement was extended until March 2022, and will automatically extend unless either party notifies the other of cancellation.
Set.fm™ Acquisition
On October 16, 2017, the Company entered into an asset purchase agreement (the “Purchase Agreement”) with PledgeMusic, Inc., whereby the Company acquired the assets of the digital live music distribution platform Set.fm™ from PledgeMusic (See Note 3 of the Consolidated Financial Statements herein). Set.fm™ allows us to record and sell live shows directly to consumer’s mobile devices, uploading simultaneously with the artist’s performance, similar to the “instant live” physical distribution of DiscLive. The platform features an innovative and an easy-to-use DIY studio app. VNUE has conducted software updates and intends to continue to update the Set.fm™ platform which will lead to overall improvement of the platform. This will allow the Company to leverage the platform for major label music clients. Set.fm has been used to record and release content for numerous major artists such as Rob Thomas, Patty Smyth and Scandal, and King’s X.
Soundstr™ Acquisition
On April 23, 2018, the Company entered into an asset purchase agreement with MusicPlay Analytics, LLC (d/b/a Soundstr) (“Soundstr”) (the “Soundstr Purchase Agreement”) whereby the Company acquired the assets of Soundstr, a technology that aims to help businesses pay fairer music license fees based on actual music usage (see Note 3 of the Consolidated Financial Statements herein).
The Company intends to continually update and improve the above technologies as funds and resources permit. Currently the technology has progressed such that we deployed some units to the field for further testing, and commercialization.
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Recent Developments
On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most U.S. states and many countries have issued policies intended to stop or slow the further spread of the disease.
There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may have. The onset of Covid-19 in March 2020 has had a material adverse impact on our business
Impact of Current Coronavirus (COVID-19) Pandemic on the Company
While the COVID-19 pandemic had an effect on our ability to complete our financial statements in a timely manner, and had a material effect on our revenues from live concert events, we do not believe that it will have a material adverse effect on other aspects of our business at this time as we are currently scheduled to roll out our products in the third quarter of 2020 that are not dependent on large live venues. Nonetheless a material portion of our future set.fm and DiscLive business is dependent on the success of public events and gatherings. If quarantine and social distancing rules or even social fears continue through such time then we will be materially adversely affected, as these gatherings will see fewer attendees. However, as Soundstr™ is rolled out, we do not expect to have a materially adverse effect, as our devices will be rolled out to radio stations initially, which do not depend upon attendees. We also do not anticipate expending material costs on implementing social distancing or similar measures in our business.
Corporate Developments
None.
Our Products
We have two main product lines:
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| · | Set.fm™ / DiscLive Network™ - Our consumer app platform allows customers to download and purchase, via their individual mobile device, the concert they just attended. There are also physical collectible products which are recorded and sold at shows as well as online through the Company’s exclusive partner DiscLive Network™. The app itself is free to download, and allows for in app purchases regarding the content. (Currently, this is the only platform that generates any revenue for the Company.)
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| · | Soundstr™ - a comprehensive music identification and rights management Cloud platform that we are developing, when fully deployed, can accurately track and audit public performances of music, creating a more transparent ecosystem for general music licensing and associated royalty payments, which will help ensure the correct stakeholders are compensated through the use of our “big data” collection. |
While Set.fm™ and Soundstr™ are proprietary marks of the Company, DiscLive, and its related marks and names are not owned by the Company and are owned and utilized by RockHouse Live Media Productions, Inc. The Company has not filed any formal trademark applications relating to Set.fm™ with the United States US Patent and Trademark Office but has been using these marks openly since 2017 and claims common law rights to them.
The Company currently only generates revenue from Set.fm and from DiscLive by (a) recording the audio of live concerts, and selling the content “instantly” through its set.fm website, as well as the IOS Set.fm mobile application, and (b) selling content on physical products such as CDs, which are burned on-site where customers can purchase them. Our customers are fans of live music and the bands which we record.
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The Market
Our business has two main “end users” or revenue sources:
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Set.fm™ & DiscLive™: “Instant Live Recording and Experiential Products”
DiscLive and set.fm™ provide customers with instant experiential content, so that they can take their experience home with them. The concert never ends with DiscLive and Set.fm™. With the increase in digital media (and related piracy issues), music concerts and related media and merchandising and events (e.g. post-concert shows etc.) are becoming the primary driver in music revenues today.
How Instant Live Recording Works
Teams follow certain bands and musical artists on tour, record the live performances and then release high-quality audio products instantly via the set.fm™ mobile app and DiscLive physical products (online and onsite). Set.fm™ also offers “indie” artists a free “Set.fm Studio” app which allows them to record themselves and then sell their music on our platform. Thousands of shows have been recorded all over the world and tens of thousands of products sold. Major artist clients (past and current) include Rob Thomas, Peter Frampton, King’s X, Bad Company, Slash, Seether, Devo, Blondie, and others.
Sales and Marketing
We sell CDs and digital downloads of recorded live concerts, which are made available to customers immediately after shows. We partner with the artists and labels and engage with our customer base to make them aware of the availability of these products. We market through artist and label websites, as well as their social media, and our own platforms. We have a strong grassroots marketing strategy that leverages our relationships. Customers are made aware of our products before a concert, during a concert (including and on-site sales and production team) and after a concert is over. Our executive team has a large high level network with multiple music companies, labels and management companies. As such, we do not require a large marketing team to court potential artists to come and be a part of our platform.
Seasonality
We do not have a seasonal business cycle.
Environmental Matters
Our business currently does not implicate any environmental regulation.
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Intellectual Property
VNUE has pending patents for our Soundstr technology, and expects to file more related patents around the Soundstr™ platform, as well as Set.fm.
The Company has not filed any formal trademark applications relating to Set.fm or Soundstr with the United States US Patent and Trademark Office but has been using these marks openly since approximately fall 2017 and spring 2018 respectively, although both marks had been in use well before our acquisition of the assets.
We have patent-pending technology, USPTO Application US 2017/0316089, “System and Method for Capturing, Archiving and Controlling Content in a Performance Venue” which relates to our Soundstr™ technology.
We have patents pending for our Soundstr technology, and expect to file more patents and trademarks around technology we are developing or have already developed, or plan to develop, funds permitting. We will continue to assess the need for any copyright, trademark, or patent applications on an ongoing basis.
DESCRIPTION OF PROPERTY CONFIRMED
Our corporate office is located at 104 W. 29th Street, 11th Floor, New York, NY 10001. We pay $640 a month to utilize this space. Our telephone number is 833.WE.R.LIVE. The office space is shared with other companies and entrepreneurs. Additionally, we pay $1,000 per month for the use of the space at 5711 Raleigh LaGrange, Memphis, TN 38134, which is a warehouse and fulfillment center for physical products, and storage for equipment. We began the use of the New York office space in April 2015.
From time to time, we may become involved in various lawsuits and legal proceedings relating to claims arising out of our operations in the normal course of business. However, we are currently not involved with any legal proceedings or claims.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with our financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that are based on our current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements.
Impact of Current Coronavirus (COVID-19) Pandemic on the Company
Overview
The live music and entertainment space are constantly searching for new monetization outlets. Music licensing and royalties are particular “hot button” issues in the industry. We believe that we have developed solutions for these issues that create new revenue streams and simultaneously help protect the rights of the creators and help ensure they are properly compensated. This benefits not only artists, labels, publishers, and live venues, but also our customers.
On May 29, 2015, Tierra Grande entered into a Merger Agreement with VNUE, Inc. Pursuant to which, all of the outstanding shares of any class or series of VNUE, Inc. were exchanged for an aggregate of 50,762,987 shares of Tierra Grande common stock. As a result of the Merger Agreement, VNUE, Inc. became a wholly-owned subsidiary of the Company, and the transaction was accounted for as a reverse merger whereby VNUE, Inc. was the acquired company for accounting purposes, and the Company deemed the legal acquirer.
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Through VNUE, Inc. we carry on business as a live entertainment music technology company that offers a suite of products and services which monetize and monitor music for artists, labels, performing rights organizations, publishers, writers, radio stations, venues, restaurants, bars, and other stakeholders in music.
Critical Accounting Policies and Estimates
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include, among others, revenue recognition, recoverability of accounts receivable, digital assets, and investments. Actual results could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment involved.
Revenue Recognition
On January 1, 2019, the Company adopted the new accounting standard ASC 606. Revenue from Contracts with Customers, for all open contracts and related amendments as of December 31, 2019 using the modified retrospective method. The adoption had no impact on the reported results. Results for 2018 are presented under ASC 606, while the comparative information will not be restated and will continue to be reported under the accounting standards in effect for that period.
The Company recognizes revenue in accordance with ASC 606, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligation(s) in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligation(s) in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation.
The Company recognizes revenues derived from sub-leasing telecommunications infrastructure and the provision of telecommunications and colocation services. These revenues are accounted for as a single performance obligation satisfied over time because the customer simultaneously receives and consumes the benefits of the Company’s performance on a monthly basis. These arrangements stipulate monthly billing and the Company has elected the “as invoiced” practical expedient to recognize revenue as the services are consumed as the Company has the right to payment in an amount that corresponds directly with the value of performance completed to date.
Taxes collected from customers and remitted to a governmental authority are reported on a net basis and are excluded from revenue. Most revenue is billed in advance on a fixed-rate basis. The remainder of revenue is billed in arrears on a transactional basis determined by customer usage.
The Company often bills customers for upfront charges. These charges relate to down payments or prepayments for future services or equipment and are influenced by various business factors including how the Company and customer agree to structure the payment terms. These payments are recognized as deferred revenue until the service is provided or equipment is delivered and installed. All ongoing fees are billed and recognized as revenue on a monthly basis as service is provided.
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
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Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.
For the twelve months ended December 31, 2020 and 2019, there were no significant deferred tax assets, except for a net operating loss carryforward for which a 100% valuation allowance has been provided.
The Company annually conducts an analysis of its tax positions and has concluded that it has no uncertain tax positions as of December 31, 2020 and 2019. The 2016 to 2019 tax years are still subject to Federal audit. The 2016 to 2020 tax years are still subject to state audit.
Recent Authoritative Guidance
In February 2017, the FASB issued ASU No. 2017-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:
|
| · | A lease liability, which is the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and |
|
|
|
|
|
| · | A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. |
Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, the lessor’s accounting with the lessee’s accounting model and Topic 606, Revenue from Contracts with Customers.
In August 2018, the FASB issued new guidance on disclosures related to fair value measurements. The guidance is intended to improve the effectiveness of the notes to financial statements by facilitating clearer communication, and it includes multiple new, eliminated and modified disclosure requirements. The guidance was effective for the Company as of January 1, 2020. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
In December 2019, the FASB issued new guidance on income taxes. The guidance removes certain exceptions to the general income tax accounting principles and clarifies and amends existing guidance to facilitate consistent application of the accounting principles. The new guidance is effective for us as of January 1, 2021. The Company is assessing the impact of the adoption of this guidance on its consolidated financial statements.
Management does not believe any other recently issued but not yet effective accounting pronouncement, if adopted, would have a material impact effect on the Company’s present or future financial statements.
Results of Operations
The following discussion and analysis of our results of operations and financial condition for the three months ended March 31, 2021 and the twelve months ended December 31, 2020 should be read in conjunction with our condensed consolidated financial statements, our audited consolidated financial statements and related notes included in this report. We are in the process of completing the development of our products and services and therefore have only nominal revenues or income. Accordingly, we are completely dependent on our capital raising efforts in order to complete development and roll out our products.
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Three Months Ended March 31, 2021, Compared to Three Months Ended March 31, 2020
Revenues
Our revenues for the three months ended March 31, 2021 and 2020, was $2,261 and $12,059, respectively. The reason for the increase/decrease was due to the lingering impact of Covid-19 which has prevented live concerts from taking place.
Direct Costs of Revenues
Our direct costs of revenues for the three months ended March 31, 2021, and 2020 was $-0- and $8,509, respectively. Gross margin is calculated by subtracting direct costs from revenue. Due to the low level Due to the low current sales levels, the associated costs are not indicative of the costs and margins we expect to generate from higher sales volumes.
General and Administrative Expenses
Our general and administrative expenses for the three months ended March 31, 2021, and 2020, was $174,028 and $176,188. These general and administrative expenses were consistent during the comparable periods. These expenses as of March 31, 2021 were primarily comprised of approximately $91,000 of legal and professional fees, and $57,500 of officers compensation.
Other Income (Expenses), Net
We recorded other income, net of $2,162,868 for the three months ended March 31, 2021, compared to other expense, net of $(466,919) for the three months ended March 31, 2020. The significant increase in other income net, in the 2021 period was primarily attributable to a reduction of $2,344,234 in the Company derivative liability related to convertible notes.
Net Income (Loss)
As a result of the foregoing revenues, direct costs of revenues, research and development expenses, general and administrative expenses, and other income (expenses), net, our net profit was $1,991,101 for the three months ended March 31, 2021, compared to a net loss for the three months ended March 31, 2020, of $(639,557).
Liquidity and Capital Resources
Since our inception, we have funded our operations primarily through private offerings of our equity securities and loans.
As of March 31, 2021, we had current assets consisting of cash and cash equivalents of $57,439.
We had negative cash flows from operating activities of $174,019 for the three months ended March 31, 2021, compared with negative cash flows from operating activities of $181,277 for the three months ended March 31, 2020. The slight decrease in our negative cash flows from operations was primarily attributable to the net change in our operating assets and liabilities in the 2021 period.
We generated cash flows from financing activities of $227,000, for the three months ended March 31, 2021, as compared to $145,600 for the three months ended March 31, 2020. The increase/decrease in net cash provided by financing operations was due to an increase in the proceeds from convertible notes.
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Twelve Months Ended December 31, 2020 Compared to Twelve Months Ended December 31, 2019
Revenues
Our revenues for the twelve months ended December 31, 2020 and 2019, amount to $22,474 and $206,161, respectively, a decrease of $183,687. The decrease in revenues in 2020 compared to 2019 is primarily attributable to the onset of Covid-19 which eliminated the possibility of holding live music events which is the essential element of the Company’s business and is necessary to generate revenues. If the Covid-19 pandemic is mitigated the Company expects to resume its tour that was cancelled in 202 with Matchbox Twenty and generate revenue, however, there can be no assurances this will occur.
Direct Costs of Revenues
Our direct costs of revenues for the twelve months ended December 31, 2020 and 2019, amounted to $8,509 and $211,031, respectively, a decrease of $202,522. The decrease in costs resulted from decreased sales volumes.
Research and Development
Our research and development expenses for the twelve months ended December 31, 2020 amounted to $-0- compared to $12,404 for the twelve months ended December 31, 2019. We believe that R&D is a material portion of our business plan and if we are unable to raise sufficient capital or to implement a proper R&D program we will be adversely affected. As we continue to move forward, we expect to spend more on R&D due to our product roadmap and in further developing solutions that will invoke both consumer interest as well as further automation and usability of our products.
General and Administrative Expenses
Our general and administrative expenses for the twelve months ended December 31, 2020 and 2019, amounted to $601,022 and $1,177,756 respectively. The increase in general and administrative expenses in 2020 compared to the same period in 2019 was due primarily to a one-time non-cash stock based compensation charge of $590,129 in 2019 related to the issuance of preferred stock, compared to $-0- in stock based compensation in 2020. Excluding stock-based compensation, general and administrative expense in 2020 was $587,627, or at level substantially equivalent to 2019 levels.
Intangible Asset Impairment
On December 31, 2019, we conducted an impairment analysis and although we believe that we will be able to generate revenues in the future from our Soundstr asset, based on the lack of any historical sales to date or lack of any pending contracts, we determined that we could not substantiate any anticipated future revenues, and determined that the remaining book value of the intangible of $132,397 should be impaired as of December 31, 2019.
Other Income (Expenses), Net
We recorded other expense, net, for the twelve months ended December 31, 2020 of $3,996,719 compared to other expense, net, of $72,671 for the year ended December 31, 2019. The significant increase in other expense, net, in 2020 compared to 2019 levels was primarily due to an increase in expense based on the increase in the fair value of the derivative liability of $3,413,629, an increase in financing costs in 2020 of $713,805; offset by a decrease in the loss on the extinguishment of debt of $268,920 in 2020.
Net Loss from Operations
As a result of the foregoing revenues, direct costs of revenues, research and development expenses, general and administrative expenses, and other income (expenses), net, our net loss for the twelve months ended December 31, 2020 and 2019, was $4,553,777 and $1,400,098, respectively.
Liquidity and Capital Resources
Since our inception, we have funded our operations primarily through private offerings of our equity securities and loans, including convertible debt. Our ability to raise capital in the form of equity or convertible debt will be hindered if and as our stock price decreases or we are required to increase our capitalization.
As of December 31, 2020, we had cash and cash equivalents of $4,458.
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We had negative cash flow from operating activities of $518,493 for the twelve months ended December 31, 2020, compared with negative cash flow from operating activities of $501,905 for the twelve months ended December 31, 2019.
We had no cash used for investing activity in either 2020 or 2019.
Cash flow provided by financing activities was $470,855 for the year ended December 31, 2020 as compared to $535,810 for the twelve months ended December 31, 2019. The decrease in cash flow provided from financing activities is primarily attributable to a reduction in proceeds from the issuance of convertible notes and promissory notes of approximately $65,000 in 2020 compared to 2019 levels.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Going Concern
The Company’s auditors have expressed doubt as to the ability of the Company to continue as a going concern. As of March 31, 2021, the Company had cash on hand of $57,43. The Company had negative working capital of $6,144,655 and an accumulated deficit of $14,764,575. As of December 31, 2020, the Company had a stockholders’ deficit of $16,755,676 and negative working of $8,247,522. Certain of the Company’s notes payable are also past due, however, we have negotiated extensions for them and continue to honor them. One of our vendors claims that we owe them $1,172,781 in unpaid interest and penalties above the principal amount due. We intend to dispute this claim. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements were issued. The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Management estimates that the current funds on hand will only be sufficient to continue operations through July, 2021. Historically, the Company has used the proceeds of convertible notes to fund its operations. The Company believes that it can continue to raise proceeds during 2021, however, there can be no assurances. The ability of the Company to continue as a going concern is dependent on the Company’s ability to execute its strategy and in its ability to raise additional funds. Management is currently seeking additional funds, primarily through the issuance of equity or convertible debt securities for cash to operate our business. However, among other risks and uncertainties, given our low stock price, and limited number of authorized common shares available for issuance, we will likely be required to increase our authorized capital in order to accommodate these financings, which action will require shareholder approval. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case or equity financing.
We have generated minimal revenues, have incurred losses since our inception, and rely upon the issuance of convertible notes to fund our operations. If we are unable to continue issuing convertible debt or raise equity or secure alternative financing, we may not be able to pursue our plans and our business may fail.
Contractual Obligations
None
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Smaller reporting companies are not required to provide the information required by this item.
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MANAGEMENT AND BOARD OF DIRECTORS
Board of Directors, Executive Officers and Significant Employees
The following table sets forth the names and ages of our officers and directors. Our executive officers are elected annually by our Board of Directors. Our executive officers hold their offices until they resign, are removed by the Board, or a successor is elected and qualified.
| Name |
| Age |
| Position |
|
|
|
|
|
|
| M. Zach Bair |
| 59 |
| Chairman, Chief Executive Officer and Chief Accounting Officer |
| Anthony Cardenas |
| 55 |
| Director, Chief Financial Officer and Vice President of Artist Development |
| Louis Mann |
| 70 |
| Executive Vice President |
M. Zach Bair, 59, Chairman of the Board of Directors, Chief Executive Officer and Chief Accounting Officer joined VNUE, Inc. in May 2016. Prior to his employment with VNUE, Mr. Bair was Founder, President and Chief Executive Officer for DiscLive Network/RockHouse Live Media Productions, Inc. from January 2007 to May 2016. From March 2001 to December 2006 Mr. Bair was Founder, Chairman and Chief Executive Officer of Immediatek, Inc., a music technology company Mr. Bair took public in 2002. Mr. Bair is an accomplished audio and video producer, and has been a voting member of the Recording Academy (the Grammys™) since 2012. Mr. Bair has significant experience in implementing and commercializing an “instant media” business model. After selling the original DiscLive in 2006 as part of Immediatek, Mr. Bair started a similar instant media company in 2007 under the RockHouse brand. Mr. Bair’s extensive experience in the instant media space led to the conclusion that he should serve as a director of VNUE.
Anthony Cardenas, 55, Director, Chief Creative Officer and Vice President of Artist Relations joined VNUE, Inc. in May, 2016. Prior to Mr. Cardenas’ role with our Company, he was employed by DiscLive Network/RockHouse Live Media Productions, Inc. from January 2012 to May 2016 in product development and marketing. From January 2002 to January 2012, Mr. Cardenas was employed as the President and Co-Founder the by DiskFactory.com. Mr. Cardenas’ background makes him well qualified to serve as a director.
Significant Employees
Louis Mann, 70, the Company’s Executive Vice President, joined VNUE in September 2017. Prior to joining VNUE, Mr. Mann was the President of the Media Properties division of House of Blues International since June 1999. During his musical career, Mr. Mann was involved with the development of new artists such as Whitney Houston, The Alan Parsons Project, and Barry Manilow. He served as Senior Vice President and General Manager of Capital Records, Inc. from October 1988 to December 2002 where he was in charge of developing the strategic vision for the company. Mr. Mann also founded the Third Day Partnership, LLC.
James A. King (Jim), 59, Chief Technology Officer (CTO), joined VNUE in March, 2019. Prior to joining the VNUE team, Mr. King held numerous business leadership roles, technology and operations roles, and was involved in a number of start-up efforts. Over his 33 year career, he has worked for companies such as The McGraw-Hill Companies, Reed Elsevier, LexisNexis, United Business Media’s PRNewswire, Broadcast Music Incorporated, Brightpoint Mobile, Microsoft Corporation, and AT&T/NCR Corporation. Mr. King is also the CEO for Spoken Giants, LLC and Core Rights, LLC, and provides consulting services for companies such as Outsell, Inc, Capital Investment Partners, Inc., and others.
Jock Weaver, 63, is a Special Advisor to the Company and joined VNUE in December 2018. Mr. Weaver founded and serves as Chairman of Heritage Trust Company, a private equity firm that provides advisory services to growing businesses, and can efficiently access debt and equity capital. Mr. Weaver is the youngest person in history to list a company on the London Stock Exchange and the American Stock Exchange. He has over 35 years of business experience in mergers, acquisitions, and the development of growth companies at an international level. Mr. Weaver founded TBA Entertainment Company in February 1994, one of the nation’s larger live event companies. Mr. Weaver served as the President of Hard Rock Café International, an English public company from January 1986 to January 1989.
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Jeff Zakim, 48, our Vice President of Business Development and Content Curation, joined VNUE, Inc. in October 2017. Prior to his employment with the Company, Mr. Zakim acted as a consultant from July 2015 to October 2017 for his own consultancy firm, Zakim Digital LLC. Prior to this, Mr. Zakim was employed with NAPC from September 2014 to July 2015. Mr. Zakim was employed by Eleven Seven Music Group, Inc. from January 2014 to August 2015 and Razor and Tie Enterprises, LLC from October 2012 to December 2013. From January 2011 to November 2011 Mr. Zakim was employed by Ruckus Media Group, LLC and from 2001 to November 2011 he was employed by EMI Music, Inc. Mr. Zakim has a Bachelor of Science degree in communications from Towson State University.
Term of Office
Our directors are appointed and shall hold office until his successor is elected and qualified, in accordance with our bylaws.
Family Relationships
There are no family relationships among our directors and officers.
Certain Legal Proceedings
During the past ten years no current director, executive officer, promoter or control person of the Company has been involved in the following:
(1) A petition under the Federal bankruptcy laws or any state insolvency law which was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
(2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
i. Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
ii. Engaging in any type of business practice; or
iii. Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
(4) Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;
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(5) Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
(6) Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
(7) Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
i. Any Federal or State securities or commodities law or regulation; or
ii. Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
iii. Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
(8) Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
EXECUTIVE AND DIRECTOR COMPENSATION
The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to our Chief Executive Officer and the other executive officer with compensation exceeding $100,000 during 2020 and 2019 (each a “Named Executive Officer”).
| Summary Compensation Table | |||||||||||||||||||||||||||||||||||||
| Name and Principal Position |
| Year |
|
|
Salary |
|
|
Bonus |
|
|
Stock Awards |
|
|
Option Awards |
|
| Non-Equity Incentive Plan Compensation |
|
| Nonqualified Deferred Compensation Earnings |
|
|
All Other Compensation |
|
|
Total |
| ||||||||||
|
|
|
|
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
|
|
|
| ($) |
|
| ($)(3) |
|
| ($) |
| ||||||||||
| Zach Bair, CEO(2) |
| 2020 |
|
|
| 170,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 170,000 |
| ||
|
|
| 2019 |
|
|
| 170,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 214,264 |
|
|
| 384,264 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
| Louis Mann, EVP (1)(4) |
| 2020 |
|
| $ | 60,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 60,000 |
| ||
|
|
| 2019 |
|
| $ | 60,000 |
|
|
| 0 |
|
|
| 3,050 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 109,964 |
|
|
| 170,014 |
| ||
_________
| (1) | Mr. Louis Mann, 68, Executive Vice President, joined VNUE, Inc. in September 2017. |
| (2) | $108,500 of Mr. Bair’s compensation was deferred as of December 31, 2020. |
| (3) | Represents the fair value of preferred stock awards granted in 2019. |
| (4) | $101,250 of Mr. Mann’s compensation was deferred as of December 31, 2020. |
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Equity Incentive Plan
The Company has a formal Stock Incentive Plan (the “Plan”), which was adopted on March 1, 2013, which was included as an exhibit with our Form 8-K filed April 11, 2013, and incorporated herein by reference. 15,000,000 shares of the Company’s common stock were reserved for awards in the Plan. No awards have been granted since the Plan’s adoption in March 2013.
Employment Agreements
None
Director Compensation
There is currently no agreement or arrangement to pay any of our directors for their services as our directors. The Board of Directors may award special remuneration to any director undertaking any special services on behalf of our company other than services ordinarily required of a director. No director has received and/or accrued any compensation for his services as a director, including committee participation and/or special assignments.
Outstanding Equity Awards at Fiscal Year-End
None
Long-Term Incentive Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.
Compensation Committee
We currently do not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.
Audit Committee
We do not have an audit committee. The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board of Directors when performing the functions of what would generally be performed by an audit committee. The Board of Directors approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board of Directors reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor.
Compensation of Directors
For the years ended December 31, 2020 and 2019, no members of our board of directors received compensation in their capacity as directors.
The following table set forth the ownership, as of the date of this Annual Report, of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, our directors, and our executive officers and directors as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not any pending or anticipated arrangements that may cause a change in control.
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The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security even though they may not rightfully “own” those shares. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option, or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown. The mailing address for all persons is at 104 W. 29th Street, 11th Floor, New York, NY 10001.
| Shareholders |
| # of Shares |
|
| Percentage |
| ||
| Zach Bair, Chief Executive Officer |
|
| 181,187,272 | (1) |
|
| 15.0 | % |
| Anthony Cardenas, Chief Creative Officer |
|
| 27,000,000 | (2) |
|
| 2.2 | % |
| Louis Mann, Executive Vice President |
|
| 89,921,491 | (3) |
|
| 7.4 | % |
| All directors and executive officers as a group |
|
| 298,118,763 | (4) |
|
| 24.6 | % |
| Christopher Mann |
|
| 8,185,886 |
|
|
| .7 | % |
| Thomas Jackson Weaver III |
|
| 105,000,000 | (5) |
|
| 8.7 | % |
This table is based upon information derived from our stock records. The shareholder named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based upon 1,269,633,963 shares of common stock outstanding as of June 23, 2021. The common shares outstanding include voting power of shares of Series A Preferred Stock owned by such officer or director. The Series A Preferred Stock vote on a 100:1 basis with common stockholders and convert on a 50:1 basis into common stock.
_________
| (1) | Includes 31,352,572 shares of common stock and the voting power of 1,498,347 Series A Preferred Stock which cast votes as 149,834,700 shares of common stock. The Series A Preferred Stock owned by Mr. Bair converts into 74,917,350 shares of common stock. |
| (2) | Includes 1,000,000 shares of common stock and voting power of 260,000 shares of Series A Preferred Stock which vote as 26,000,000 shares of common stock. The Series A Preferred Stock owned by Mr. Cardenas converts into 13,000,000 shares of common stock. |
| (3) | Includes 15,078,591 shares of common stock and the voting power of 748,000 shares of Series A Preferred Stock which vote as 74,842,900 shares of common stock. The Series A Preferred Stock owned by Mr. Louis Mann convert into 37,421,450 shares of common stock. |
| (4) | Includes all common stock held by such directors or officers as a group, as well as the voting power of all Series A Preferred Stock owned by such persons. |
| (5) | Includes the voting power of 1,050,000 shares of Series A Preferred Stock which vote as 105,000,000 shares of common stock. Mr. Weaver’s Series A Preferred Stock convert into 52,500,000 shares of common stock. |
Director Independence
We are not subject to listing requirements of any national securities exchange or national securities association and, as a result, we are not at this time required to have our Board comprised of a majority of “Independent Directors.” We do not believe that our directors currently meet the definition of “independent” as promulgated by the rules and regulations of NASDAQ.
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| Table of Contents |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 10, 2017, the Company entered into a Licensing Agreement with RockHouse Live Media Productions, Inc., DBA “DiscLive” or “DiscLive Network” (“DiscLive”) to formalize the terms of the Strategic Alliance entered into by the Company with DiscLive on July 21, 2016. VNUE has acquired an exclusive license from DiscLive, for a period of three years unless earlier terminated under the Agreement, for the use of all its assets, including but not limited to the DiscLive brand, website (including eCommerce platform), intellectual property, inventory, equipment, trade secrets and anything related to its business of “instant live” recording. Under the terms of the Agreement, DiscLive granted the Company a worldwide exclusive license. In exchange for the license, DiscLive will receive a license fee equal to five percent (5%) of any sales derived from the sale and use of the products and services. DiscLive is controlled by our Chief Executive Officer. Revenues of $2,261 and $12,059 during the three months ended March 31, 2021, and 2020, respectively, were recorded using the assets licensed under this agreement. For the three months ended March 31, 2021 and 2020, the fees would have amounted to $113 and $603 respectively. Our Chief Executive Officer agreed to waive the right to receive these license fees for both years.
The rights of our stockholders are be governed by Nevada law, and our Articles of Incorporation, as amended, and our Bylaws. The following briefly summarizes the material terms of our Common Stock.
Common Stock
The Company is authorized to issue 2,000,000,000 shares of common stock at a par value of $0.0001 and as of June 23, 2021 had 1,269,633,963 shares of common stock issued and outstanding.
Dividend Rights
The holders of outstanding shares of our common stock are entitled to receive dividends out of funds legally available at the times and in the amounts that our board of directors may determine.
Voting Rights
Each holder of our common stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Cumulative voting for the election of directors is not provided for in our articles of incorporation, which means that the holders of a majority of our shares of common stock voted can elect all of the directors then standing for election.
Preemptive or Similar Rights
Our Common Stock is not entitled to preemptive rights and is not subject to conversion or redemption.
Liquidation Rights
Upon our liquidation, dissolution, or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our Common Stock outstanding at that time after payment of other claims of creditors.
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| Table of Contents |
Preferred Stock
The Company is authorized to issue 20,000,000 shares of preferred stock at a par value of $0.0001 and as of June 23, 2021 had 4,126,776 shares of Preferred Stock issued and outstanding.
We have authority to issue 20,000,000 shares of Preferred Stock. Our Board of Directors may issue the authorized Preferred Stock in one or more series and may fix the number of shares of each series of preferred stock. Our Board of Directors also has the authority to set the voting powers, designations, preferences and relative, participating, optional or other special rights of each series of Preferred Stock, including the dividend rights, dividend rate, terms of redemption, redemption price or prices, conversion and voting rights and liquidation preferences. Preferred Stock can be issued and its terms set by our Board of Directors without any further vote or action by our stockholders.
Series A Preferred Stock
We have 20,000,000 shares of Preferred Stock authorized with 4,126,776 issued and outstanding. Of the 20,000,000 shares of Preferred Stock, 5,000,000 shares are designated as Series A Convertible Preferred Stock. There are no other rights, including conversion liquidation preferences, with the Series A Preferred Stock.
Pursuant to the Series A Designation, each share of Series A Preferred Stock may be converted into 50 shares of common stock of the Company. The Series A Preferred Stockholders are also entitled to share among dividends with the common stock shareholders of the Company on an as-converted basis. Each share of Series A Preferred Stock shall vote with the Common Stock as a single class on all matters brought before the shareholders, on a 100 to 1 basis with the Common Stock, such that for every share of Series A Preferred Stock held, such share of Series A Preferred Stock shall entitle the holder thereof to cast 100 votes on any matter brought before the holders of Common Stock as a class.
We refer you to our Articles of Incorporation, any amendments thereto, Bylaws, and the applicable provisions of the Nevada Revised Statutes for a more complete description of the rights and liabilities of holders of our securities.
Transfer Agent
The transfer agent for our capital stock is ClearTrust, LLC with an address of 16540 Pointe Village Drive, Suite 205, Lutz, Florida 33558. The telephone number is (813) 235-4490.
Indemnification of Directors and Officers
Neither our articles of incorporation, nor our bylaws, prevent us from indemnifying our officers, directors and agents to the extent permitted under the Nevada Revised Statutes (“NRS”). NRS Section 78.7502, provides that a corporation may indemnify any director, officer, employee or agent of a corporation against expenses, including fees, actually and reasonably incurred by him in connection with any defense to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to Section 78.7502(1) or 78.7502(2), or in defense of any claim, issue or matter therein.
NRS 78.7502(1) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
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NRS Section 78.7502(2) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
NRS Section 78.747 provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.
Our charter provides that we will indemnify our directors, officers, employees and agents to the extent and in the manner permitted by the provisions of the NRS, as amended from time to time, subject to any permissible expansion or limitation of such indemnification, as may be set forth in any stockholders’ or directors’ resolution or by contract. Any repeal or modification of these provisions approved by our stockholders will be prospective only and will not adversely affect any limitation on the liability of any of our directors or officers existing as of the time of such repeal or modification. We are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the NRS would permit indemnification.
Anti-Takeover Effects of Certain Provisions of Nevada Law
Effect of Nevada Anti-takeover Statute. We are subject to Section 78.438 of the Nevada Revised Statutes, an anti-takeover law. In general, Section 78.438 prohibits a Nevada corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless prior to that date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder. Section 78.439 provides that business combinations after the three-year period following the date that the stockholder becomes an interested stockholder may also be prohibited unless approved by the corporation’s directors or other stockholders or unless the price and terms of the transaction meet the criteria set forth in the statute.
Section 78.416 defines “business combination” to include the following:
|
| · | any merger or consolidation involving the corporation and the interested stockholder or any other corporation which is an affiliate or associate of the interested stockholder; |
|
|
|
|
|
| · | any sale, transfer, pledge or other disposition of the assets of the corporation involving the interested stockholder or any affiliate or associate of the interested stockholder if the assets transferred have a market value equal to 5% or more of all of the assets of the corporation or 5% or more of the value of the outstanding shares of the corporation or represent 10% or more of the earning power of the corporation; |
|
|
|
|
|
| · | subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation with a market value of 5% or more of the value of the outstanding shares of the corporation; |
|
|
|
|
|
| · | the adoption of a plan of liquidation proposed by or under any arrangement with the interested stockholder or any affiliate or associate of the interested stockholder; |
|
|
|
|
|
| · | any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder or any affiliate or associate of the interested stockholder; or |
|
|
|
|
|
| · | the receipt by the interested stockholder or any affiliate or associate of the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. |
In general, Section 78.423 defines an interested stockholder as any entity or person beneficially owning, directly or indirectly, 10% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by any of these entities or persons.
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Control Share Acquisitions. Sections 78.378 through 78.3793 of the Nevada Revised Statutes limit the voting rights of certain acquired shares in a corporation. The provisions apply to any acquisition of outstanding voting securities of a Nevada corporation that has 200 or more stockholders, at least 100 of which are Nevada residents, and conducts business in Nevada (an “issuing corporation”) resulting in ownership of one of the following categories of an issuing corporation’s then outstanding voting securities: (i) twenty percent or more but less than thirty-three percent; (ii) thirty-three percent or more but less than fifty percent; or (iii) fifty percent or more. The securities acquired in such acquisition are denied voting rights unless a majority of the security holders approve the granting of such voting rights. Unless an issuing corporation’s articles of incorporation or bylaws then in effect provide otherwise: (i) voting securities acquired are also redeemable in part or in whole by an issuing corporation at the average price paid for the securities within 30 days if the acquiring person has not given a timely information statement to an issuing corporation or if the stockholders vote not to grant voting rights to the acquiring person’s securities, and (ii) if outstanding securities and the security holders grant voting rights to such acquiring person, then any security holder who voted against granting voting rights to the acquiring person may demand the purchase from an issuing corporation, for fair value, all or any portion of his securities. These provisions do not apply to acquisitions made pursuant to the laws of descent and distribution, the enforcement of a judgment, or the satisfaction of a security interest, or made in connection with certain mergers or reorganizations.
Undesignated Preferred Stock
We are authorized to issue 20,000,000 shares of preferred stock, of which 5,000,000 shares are designated as Series A Preferred Stock. The ability to authorize undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of the company. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of the company.
The provisions of the Nevada Revised Statutes, our articles of incorporation and our bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that shareholders may otherwise deem to be in their best interests.
Our Shares of common stock subject to the Offering are referred to herein collectively as the “Shares.” The Shares will be sold through our management, who may be considered an underwriter as that term is defined in Section 2(a)(11) of the Securities Act. Our management will not receive any commission in connection with the sale of Shares, although we may reimburse them for direct expenses incurred by them in connection with the offer and sale of the Shares. We estimate our total offering registration costs to be approximately $[ ] and our legal, auditor, miscellaneous and related fees will be $[ ] equaling at total expense to the Company of $[ ] relating to the registration. There is no minimum number of Shares that must be sold by us for the offering to proceed. We will retain any proceeds from the Offering.
Our management will be relying on, and complying with, Rule 3a4-1(a)(4)(ii) of the Exchange Act as a “safe harbor” from registration as a broker-dealer in connection with the offer and sale of the Shares. In order to rely on such “safe harbor” provisions provided by Rule 3a4-1(a) (4) (ii), each must be in compliance with all of the following:
|
| · | an individual must not be subject to a statutory disqualification; |
|
|
|
|
|
| · | an individual must not be compensated in connection with such selling participation by payment of commissions or other payments based either directly or indirectly on such transactions; |
|
|
|
|
|
| · | an individual must not be an associated person of a broker-dealer; |
|
|
|
|
|
| · | an individual must primarily perform, or is intended primarily to perform at the end of the Offering, substantial duties for or on behalf of the Company otherwise than in connection with transactions in securities; and |
|
|
|
|
|
| · | an individual must perform substantial duties for the Company after the close of the Offering not connected with transactions in securities, and not have been an associated person of a broker or dealer for the preceding 12 months, and not participate in selling an offering of securities for any issuer more than once every 12 months. |
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| Table of Contents |
Each member of our management will comply with the guidelines enumerated in Rule 3a4-1(a) (4) (ii). Neither our management nor any of their affiliates will be purchasing Shares in the Offering.
You may purchase Shares by completing and manually executing a simple subscription agreement and delivering it with your payment in full for all Shares you wish to purchase to our offices. A copy of the form of that subscription agreement is attached as an exhibit to our registration statement of which this Prospectus is a part. Your subscription shall not become effective until accepted by us and approved by our counsel. Our subscription process is as follows:
|
| · | this Prospectus, with subscription agreement, is delivered by the Company to each offeree;
|
|
| · | the subscription is completed by the offeree, and submitted with check back to the Company where the subscription and a copy of the check is emailed to counsel for review;
|
|
| · | each subscription is reviewed by counsel for the Company to confirm the subscribing party completed the form, and to confirm the state of acceptance;
|
|
| · | once approved by counsel, the subscription is accepted by management and the funds shall be deposited within four days of acceptance;
|
|
| · | subscriptions not accepted are returned with all funds sent with the subscription within three business days of the Company’s receipt of the subscription, without interest or deduction of any kind. |
The validity of the shares of common stock being offered by this prospectus has been passed upon for us by The Crone Law Group, P.C.
EXPERTS
The consolidated financial statements included in this prospectus and in the registration statement for the quarter ended March 31, 2021 and the years ended December 31, 2020 and December 31, 2019 have been audited by BFBorgers CPA PC, an independent registered public accounting firm, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a Registration Statement on Form S-1 we have filed with the SEC. We have not included in this prospectus all of the information contained in the Registration Statement and you should refer to our Registration Statement and its exhibits for further information. You can obtain a copy of the Registration Statement, including the exhibits filed with it, from the SEC as indicated below.
We will file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any materials we file with the SEC at their Public Reference Room at 100 F Street, NE, Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. You may obtain information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our filings are also available to the public from commercial document retrieval services and at the website maintained by the SEC at www.sec.gov.
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. Therefore, if anyone gives you different or additional information, you should not rely on it. The information contained in this prospectus is correct as of its date. It may not continue to be correct after this date.
| 33 |
| Table of Contents |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Condensed Consolidated Financial Statements (Unaudited) |
|
| |
| Unaudited Condensed Consolidated Balance Sheets as of March 31, 2021, and December 31, 2020 |
| F-2 |
|
|
| F-3 |
| |
|
| F-4 |
| |
|
| F-5 |
| |
| Notes to Unaudited Condensed Consolidated Financial Statements |
| F-6 |
|
| F-1 |
|
| ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| |||||||
| (Unaudited) |
| |||||||
|
|
|
|
|
| ||||
|
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||
|
|
|
|
|
| ||||
| Assets |
| |||||||
| Current assets: |
|
|
|
|
|
| ||
| Cash |
| $ | 57,439 |
|
| $ | 4,458 |
|
| Prepaid expenses |
|
| 100,000 |
|
|
| 100,000 |
|
| Total current assets |
|
| 157,439 |
|
|
| 104,458 |
|
| Total assets |
| $ | 157,439 |
|
| $ | 104,458 |
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and Stockholders' Deficit | ||||||||
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable and accrued expenses |
| $ | 2,432,421 |
|
| $ | 2,372,072 |
|
| Shares to be issued |
|
| 247,707 |
|
|
| 247,707 |
|
| Accrued payroll-officers |
|
| 216,750 |
|
|
| 209,750 |
|
| Advances from former officer |
|
| 720 |
|
|
| 720 |
|
| Notes payable |
|
| 34,000 |
|
|
| 34,000 |
|
| Deferred revenue |
|
| 74,225 |
|
|
| 74,225 |
|
| Convertible notes payable, net |
|
| 2,183,922 |
|
|
| 1,956,922 |
|
| Purchase liability |
|
| 300,000 |
|
|
| 300,000 |
|
| Derivative liability |
|
| 812,349 |
|
|
| 3,156,582 |
|
| Total current liabilities |
|
| 6,302,094 |
|
|
| 8,351,979 |
|
| Total liabilities |
|
| 6,302,094 |
|
|
| 8,351,979 |
|
|
|
|
|
|
|
|
|
|
|
| Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stockholders' Deficit |
|
|
|
|
|
|
|
|
| Preferred stock, par value $0.0001: 20,000,000 shares authorized 4,126,776 issued and outstanding |
|
| 413 |
|
|
| 413 |
|
| Common stock, par value $0.0001, 2,000,000,000 shares authorized; 1,211,495,162 and 1,211,495,162 shares issued and outstanding, respectively |
|
| 121,149 |
|
|
| 121,149 |
|
| Additional paid-in capital |
|
| 8,498,358 |
|
|
| 8,386,593 |
|
| Accumulated deficit |
|
| (14,764,575 | ) |
|
| (16,755,676 | ) |
| Total stockholders' deficit |
|
| (6,144,655 | ) |
|
| (8,247,522 | ) |
| Total Liabilities and Stockholders' Deficit |
| $ | 157,439 |
|
| $ | 104,458 |
|
|
|
|
|
|
|
|
|
|
|
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||
| F-2 |
| Table of Contents |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||||||
|
|
|
|
|
| ||||
|
|
| For the Three |
|
| For the Three |
| ||
|
|
| Months Ended |
|
| Months Ended |
| ||
|
|
| March 31, 2021 |
|
| March 31, 2020 |
| ||
|
|
|
|
|
|
|
| ||
| Revenues - related party |
| $ | 2,261 |
|
| $ | 12,059 |
|
| Direct costs of revenue |
|
| - |
|
|
| 8,509 |
|
| Gross margin (loss) |
|
| 2,261 |
|
|
| 3,550 |
|
| Operating expenses: |
|
|
|
|
|
|
|
|
| General and administrative |
|
| 174,028 |
|
|
| 176,188 |
|
| Total costs and expenses |
|
| 174,028 |
|
|
| 176,188 |
|
| Operating loss |
|
| (171,767 | ) |
|
| (172,638 | ) |
| Other income (expense), net |
|
|
|
|
|
|
|
|
| Change in fair value of derivative liability |
|
| 2,344,234 |
|
|
| (290,862 | ) |
| Loss on the extinguishment of debt |
|
| - |
|
|
| (72,709 | ) |
| Financing costs |
|
| (181,366 | ) |
|
| (103,348 | ) |
| Other income (expense), net |
|
| 2,162,868 |
|
|
| (466,919 | ) |
| Net income (loss) |
| $ | 1,991,101 |
|
| $ | (639,557 | ) |
|
|
|
|
|
|
|
|
|
|
| Net loss per common share - basic and diluted |
| $ | 0.00 |
|
| $ | (0.00 | ) |
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
| Basic and diluted |
|
| 1,211,495,162 |
|
|
| 1,029,274,036 |
|
|
|
|
|
|
|
|
|
|
|
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||
| F-3 |
| Table of Contents |
| (UNAUDITED) CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT |
| FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2021 AND 2020 |
|
|
|
|
|
|
|
|
| Par value $0.001 |
|
| Additional |
|
|
|
|
|
|
| ||||||||||
|
|
| Preferred Shares |
|
| Common Shares |
|
| Paid- in |
|
|
|
|
|
|
| |||||||||||||
|
|
| Number |
|
| Amount |
|
| Number |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Total |
| |||||||
| Balance - December 31, 2019 |
|
| 4,126,776 |
|
| $ | 413 |
|
|
| 770,883,602 |
|
| $ | 77,088 |
|
| $ | 8,099,346 |
|
|
| (12,201,899 | ) |
|
| (4,025,052 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares issued on conversion of notes payable |
|
|
|
|
|
|
|
|
|
| 378,872,550 |
|
|
| 37,887 |
|
|
| 83,421 |
|
|
|
|
|
|
| 121,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (639,557 | ) |
|
| (639,557 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, March 31, 2020 |
|
| 4,126,776 |
|
| $ | 413 |
|
|
| 1,149,756,152 |
|
| $ | 114,975 |
|
| $ | 8,182,767 |
|
| $ | (12,841,456 | ) |
| $ | (4,543,301 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Par value $0.001 |
|
|
| Additional |
|
|
|
|
|
| ||||||||
|
|
| Preferred Shares |
|
| Common Shares |
|
|
| Paid- in |
|
|
| ||||||||||||||||
|
|
| Number |
|
| Amount |
|
| Number |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Total |
| |||||||
| Balance - December 31, 2020 |
|
| 4,126,776 |
|
| $ | 413 |
|
|
| 1,211,495,162 |
|
| $ | 121,149 |
|
| $ | 8,386,593 |
|
| $ | (16,755,676 | ) |
| $ | (8,247,521 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,991,101 |
|
|
| 1,991,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Beneficial conversion feature of convertible notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 111,765 |
|
|
|
|
|
|
| 111,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, March 31, 2021 |
|
| 4,126,776 |
|
| $ | 413 |
|
|
| 1,211,495,162 |
|
| $ | 121,149 |
|
| $ | 8,498,358 |
|
| $ | (14,764,575 | ) |
| $ | (6,144,655 | ) |
The accompanying notes are an integral part of these financial statements
| F-4 |
| Table of Contents |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited) |
|
|
| For the Three |
|
| For the Three |
| ||
|
|
| Months Ended |
|
| Months Ended |
| ||
|
|
| March 31, 2021 |
|
| March 31, 2020 |
| ||
| Cash Flows From Operating Activities: |
|
|
|
|
|
| ||
| Net income (loss) |
| $ | 1,991,101 |
|
| $ | (639,557 | ) |
| Adjustments to reconcile net income to net cash provided by (used for) operating activities |
|
|
|
|
|
|
|
|
| Change in the fair value of derivatives |
|
| (2,344,233 | ) |
|
| 290,862 |
|
| Loss on the extinguishment of debt |
|
| - |
|
|
| 72,709 |
|
| Amortization of debt discount |
|
| 111,765 |
|
|
| 48,193 |
|
| Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
| Prepaid expenses |
|
| - |
|
|
| (100,000 | ) |
| Accounts payable and accrued interest |
|
| 60,348 |
|
|
| 8,541 |
|
| Deferred revenue |
|
| - |
|
|
| 74,225 |
|
| Accrued payroll officers |
|
| 7,000 |
|
|
| 63,750 |
|
| Net cash (used in) operating activities |
|
| (174,019 | ) |
|
| (181,277 | ) |
|
|
|
|
|
|
|
|
|
|
| Cash Flows From Investing Activities: |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
| Payoff of convertible note |
|
| - |
|
|
| (4,400 | ) |
| Proceeds from the issuance of convertible notes |
|
| 227,000 |
|
|
| 150,000 |
|
| Net cash provided by investing activities |
|
| 227,000 |
|
|
| 145,600 |
|
|
|
|
|
|
|
|
|
|
|
| Net Increase (Decrease) In Cash |
|
| 52,981 |
|
|
| (35,677 | ) |
| Cash At The Beginning Of The Period |
|
| 4,458 |
|
|
| 52,096 |
|
| Cash At The End Of The Period |
| $ | 57,439 |
|
| $ | 16,419 |
|
|
|
|
|
|
|
|
|
|
|
| Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
| Cash paid for interest |
| $ | - |
|
| $ | - |
|
| Cash paid for income taxes |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
| Non-Cash Financing Activities |
|
|
|
|
|
|
|
|
| Common shares issued upon conversion of notes payable and accrued interest |
| $ | - |
|
| $ | 121,308 |
|
|
|
|
|
|
|
|
|
|
|
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||
| F-5 |
| Table of Contents |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
History and Organization
VNUE, Inc. (formerly Tierra Grande Resources, Inc.) (“VNUE”, “TGRI”, or the “Company”) was incorporated under the laws of the State of Nevada on April 4, 2006.
On May 29, 2015, VNUE, Inc. entered into a merger agreement with VNUE Washington, Inc. Pursuant to the terms of the Merger Agreement, all of the outstanding shares of any class or series of VNUE Washington were exchanged for an aggregate of 50,762,987 shares of TGRI common stock. As a result of the Merger, VNUE Washington became a wholly-owned subsidiary of the Company, and the transaction was accounted for as a reverse merger with VNUE Washington deemed the acquiring company for accounting purposes, and the Company deemed the legal acquirer.
The Company is developing technology driven solutions for artists, venues and festivals to automate the capturing, publishing, and monetization of their content, as well as protection of their rights.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the three months ended March 31, 2021 the Company used cash in operations of $174,019, and as of March 31, 2021 had a stockholders’ deficit of $14,764,575. In addition, the Company had negative working capital of $6,144,656. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The Company does not have any commitments for additional capital. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2020, consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.
On March 31, 2021, the Company had cash on hand of $57,439. Management estimates that the current funds on hand will be sufficient to continue operations through July, 2021. The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. Historically, the Company has been able to fund its operations from the proceeds of notes payable and convertible notes. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company can obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in the case of equity financing.
Management’s Representation of Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto at December 31, 2020, as presented in the Company’s Annual Report on Form 10-K filed on April 8, 2021 with the SEC.
| F-6 |
| Table of Contents |
NOTE 2 – SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES AND PRACTICES
Basis of Consolidation
The Company consolidates all wholly-owned and majority-owned subsidiaries in which the Company’s power to control exists. The Company consolidates the following subsidiaries and/or entities:
| Name of consolidated subsidiary or Entity |
| State or other jurisdiction of incorporation or organization |
| Date of incorporation or formation (date of acquisition/disposition, if applicable) |
| Attributable interest |
| |
|
|
|
|
|
|
|
|
| |
| VNUE Inc. (formerly TGRI) |
| The State of Nevada |
| April 4, 2006 (May 29, 2015) |
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
| VNUE Inc. (VNUE Washington) |
| The State of Washington |
| October 16, 2014 |
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
| VNUE LLC |
| The State of Washington |
| August 1, 2013 (December 3, 2014) |
|
| 100 | % |
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.
The Company recognizes revenue on the sale CDs and USB drives that contain the recording of live concerts and made available to concert attendees immediately after the show and on-line. Revenue is recognized on the sale of a product when our performance obligation is completed which is when the risk of loss transfers to our customers and the collection of the receivable is reasonably assured, which generally occurs when the product is purchased.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. Significant estimates include the assumptions used for impairment testing of intangible assets, assumptions used to value the derivative liabilities, the valuation allowance for the deferred tax asset and the accruals for potential liabilities. Actual results could differ from these estimates.
| F-7 |
| Table of Contents |
Fair Value of Financial Instruments
The Company determines the fair value of its assets and liabilities based on the exchange price in U.S. dollars that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:
|
| · | Level 1 — Quoted prices in active markets for identical assets or liabilities. |
|
|
|
|
|
| · | Level 2 — Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
|
|
|
|
|
| · | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The carrying amounts of financial instruments such as cash, and accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments. The carrying values of our notes payable approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.
The fair value of the derivative liabilities of $812,349 and $3,156,582 on March 31, 2021, and December 31, 2020, respectively, were valued using Level 3 inputs.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not the net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.
Income (Loss) per Common Share
Basic net income (loss) per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed giving effect to all dilutive potential shares of Common Stock that were outstanding during the period. Diluted income (loss) per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income (loss) of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income (loss) per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. Dilutive potential shares of Common Stock consist of incremental shares of Common Stock issuable upon exercise of stock options. No dilutive potential shares of Common Stock were included in the computation of diluted net loss per share on March 31, 2021, because their impact was anti-dilutive. As of March 31, 2021, the Company had 15,800,319 outstanding warrants and 1,747,064,356 shares related to convertible notes payables respectively, which were excluded from the computation of net loss per share.
Recently Issued Accounting Pronouncements
On Dec. 18, 2019, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) 2019-12, which affects general principles within Topic 740, Income Taxes. The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes. The FASB has stated that the ASU is being issued as part of its Simplification Initiative, which is meant to reduce complexity in accounting standards by improving certain areas of generally accepted accounting principles (GAAP) without compromising information provided to users of financial statements. The Company adopted this guidance on January 1, 2021 which had no impact on the Company’s financial statements.
| F-8 |
| Table of Contents |
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations. The Company adopted ASC 842 on January 1, 2019. However, the adoption of the standard had no impact on the Company’s financial statements since all Company leases are month to month, or short-term rentals.
NOTE 3 – PREPAID EXPENSE
On Jan 9th, 2020, the Company entered into an agreement with recording and performance artist, Matchbox Twenty “MT Agreement”), to record its 2020 tour and sell limited edition double CD sets, download cards, and digital downloads. As part of the deal, the Company agreed to pay an advance of $100,000 against sales, to MT and its affiliated companies, which was paid in full in installments, with the last installment of $40,000 paid on March 4th. We have recorded this amount as a prepaid expense on our consolidated balance sheet as of March 31, 2021 and December 31, 2020.
NOTE 4 – RELATED PARTY TRANSACTIONS
DiscLive Network
On July 10, 2017, the Company entered into a Licensing Agreement with RockHouse Live Media Productions, Inc., DBA “DiscLive” or “DiscLive Network” (“DiscLive”) to formalize the terms of the Strategic Alliance entered into by the Company with DiscLive on July 21, 2016. VNUE has acquired an exclusive license from DiscLive, for a period of three years unless earlier terminated under the Agreement, for the use of all its assets, including but not limited to the DiscLive brand, website (including eCommerce platform), intellectual property, inventory, equipment, trade secrets and anything related to its business of “instant live” recording. Under the terms of the Agreement, DiscLive granted the Company a worldwide exclusive license. In exchange for the license, DiscLive will receive a license fee equal to five percent (5%) of any sales derived from the sale and use of the products and services. DiscLive is controlled by our Chief Executive Officer. Revenues of $2,261 and $12,059 during the three months ended March 31, 2021, and 2020, respectively, were recorded using the assets licensed under this agreement. For the three months ended March 31, 2021 and 2020, the fees would have amounted to $113 and $603 respectively. Our Chief Executive Officer agreed to waive the right to receive these license fees for both years.
Accrued Payroll to Officers
Accrued payroll to officers was $216,750 and $209,750 respectively, as of March 31, 2021, and December 31, 2020, respectively. The Chief Executive Officers’ compensation is $170,000 per year.
Advances from Officers/Stockholders
From time to time, officers/stockholders of the Company advance funds to the Company for working capital purposes. During the year ended December 31, 2019, a former employee and stockholder agreed to forgive $14,000 owed by the Company. The Company recorded the $14,000 as a gain on the settlement of debt, leaving a remaining balance of $720 on March 31, 2021.
NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payables are recognized initially at the transaction price and subsequently measured at the undiscounted amount of cash or other consideration expected to be paid. Accrued expenses are recognized based on the expected amount required to settle the obligation or liability.
| F-9 |
| Table of Contents |
The following table sets forth the components of the Company’s accrued liabilities on March 31, 2021, and December 31, 2020.
|
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||
| Accounts payable and accrued expense |
| $ | 592,980 |
|
|
| 587,230 |
|
| Accrued interest |
|
| 521,402 |
|
|
| 466,801 |
|
| Accrued interest and penalties Golock (a) |
|
| 1,172,782 |
|
|
| 1,172,782 |
|
| Soundstr Obligation |
|
| 145,258 |
|
|
| 145,259 |
|
| Total accounts payable and accrued liabilities |
| $ | 2,432,422 |
|
|
| 2,372,072 |
|
_________
| (a) | The Company strongly disagrees with the accrued interest and penalties claimed by Golock in regard to their notes, and intends to arbitrate or litigate this amount if a settlement on a vastly reduced amount cannot be reached. |
NOTE 6 – PURCHASE LIABILITY
On October 16, 2017, the Company entered into an agreement with PledgeMusic, Inc. (the “Seller”), whereby the Company acquired the digital live music distribution platform “Set.fm” from PledgeMusic. The purchase price for the acquisition was comprised of $50,000 paid in cash, and a purchase liability of $300,000, for an aggregate purchase price of $350,000. The Company assigned $350,000 of the purchase price to intellectual property, of which $116,668 was amortized in 2018. As of December 31, 2018, the Company recorded an impairment charge of the remaining balance of $204,165. The purchase liability is payable on the net revenues derived from VNUE’s live recording and content business and must be paid in full to the Seller no later than the three (3) year anniversary of the date of the agreement, or October 16, 2020. If the Company fails to pay the Seller the purchase liability on time, the Seller may request at any time within one hundred eighty days (180) days following the (3) year anniversary of the asset purchase agreement, that the Company immediately forfeit, convey, assign, and transfer to the Seller all or any of the Purchased Assets so requested by the Seller for no additional consideration. For the years ended December 31, 2019 and 2018, there was no net revenue derived from the acquired assets and accordingly, no payments were made on the earnout. The balance due on March 31, 2021 and December 31, 2020 was $300,000.
NOTE 7 – SHARES TO BE ISSUED
As of December 31, 2018, the Company had not yet issued 3,964,352 shares of common stock with a value of $243,839 for past services provided and for an acquisition. During the year ended December 31, 2019 the Company became obligated to issue an additional 240,000 shares of common, valued at $184, per the terms of a consulting agreement , and 1,000,000 shares of common stock valued at $3,500, as consideration for amending an existing convertible note. As of March 31, 2021 and December 31, 2020 the Company had not yet issued 5,204,352 shares of common stock with a value of $247,707.
NOTE 8 – NOTES PAYABLE -PAST DUE
On December 17, 2015, the Company issued a Promissory Note in the principal amount of $9,000. The note was due within 10 business days of the Company receiving notice of the effectiveness of its Form S-1 filed on February 22, 2016. Failure to make payment during that 10 business day period shall constitute an Event of Default, as a result of which the note will become immediately due and payable and the balance will bear interest at 7%. The Company’s Form S-1 was declared effective on March 8, 2016, and payment was due before March 22, 2016. The Company did not repay the note before March 22, 2016; therefore, the note is in default with an interest rate of 7%.
On April 30, 2019, the Company issued an unsecured Promissory Note in the principal amount of $25,000. The Note is due and payable on August 30, 2019, along with $5,000 worth of interest. The Promissory Note is past due, however, the maker of the Note has verbally agreed not to call a default.
As of March 31, 2021, the accrued interest expense on these two Notes amounted to $26,430.
The balance of the Notes Payable outstanding was $34,000 and $9,000 as of March 31, 2021, and December 31, 2020, respectively and are past due.
| F-10 |
| Table of Contents |
NOTE 9 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE, RELATED PARTIES
Convertible notes payable consists of the following:
|
|
| March 31, |
|
| December 31, |
| ||
|
|
| 2021 |
|
| 2020 |
| ||
| Various Convertible Notes (a) |
| $ | 43,500 |
|
| $ | 43,500 |
|
| Ylimit, LLC Convertible Notes (b) |
|
| 1,348,208 |
|
|
| 1,336,208 |
|
| Golock Capital, LLC Convertible Notes (c) |
|
| 339,011 |
|
|
| 339,011 |
|
| GSH Note (e) |
|
| 165,000 |
|
|
| - |
|
| Baggett Note (f) |
|
| 50,000 |
|
|
| - |
|
| Other Convertible Notes (d) |
|
| 238,203 |
|
|
| 238,203 |
|
| Convertible notes, net |
| $ | 2,183,922 |
|
| $ | 1,956,922 |
|
(a) In August 2014, the Company issued a series of convertible notes with various interest rates ranging up to 10% per annum. The Note Conversion Price is determined as follows: (a) if the Note is converted upon the Next Equity Financing, an amount equal to 80% of the price paid per share paid by the investors in the Next Equity Financing; (b) if the Note is converted in the event of a Corporate Transaction, a price per share derived by dividing a “pre-money” valuation of $8,000,000 by the number of shares outstanding immediately prior to the time of such conversion, on a fully diluted basis; or (c) if the Note is converted as part of a Maturity Conversion, a price per unit derived by dividing a “pre-money” valuation of $8,000,000 by the total number of units (restricted and non-restricted) outstanding immediately prior to the time of such conversion, on a fully diluted basis. The notes are due and payable on demand at any time after the earlier of (i) 36 months following the note issuance or (ii) the consummation of a corporate transaction if not previously converted. The balance of the notes outstanding was $45,000 as of December 31, 2018. On March 4, 2019, a note holder elected to forgive and cancel their outstanding convertible note balance of $1,500, which the Company recorded as a gain on extinguishment of debt in the accompanying consolidated statement of operations. The balance of the notes outstanding was $43,500 as of December 31, 2019 of which $28,500 was due to related parties.
(b) On May 9, 2016, the Company issued a convertible note to YLimit, LLC in the principal amount of $100,000 with interest at 10% per annum and due on May 9, 2018. The note is secured by the Company’s rights, titles and interests in all the Company’s tangible and intangible assets, including intellectual property and proprietary software whether existing now or created in the future. On August 25, 2017, the Note was amended to authorize total borrowings on this Note to $517,000, The balance of the notes outstanding was $517,000 as of December 31, 2017 and the balance of the debt discount was $137,358.
On April 12, 2018, and again on August 15, 2018, the Company and Ylimit, LLC entered into an amendment to the original secured convertible promissory note. The amendments increased the borrowing limits by $190,500 to a total of $707,500, and extended the maturity date to May 9, 2019. In addition, the amendment on April 12, 2018 modified the conversion feature to state that all borrowings under the note will be converted at 75% of the per share stock price in the equity funding, but in no event shall the conversion price be less than $0.035 per share. This feature gave rise to a derivative liability of $135,900 during the period ended December 31, 2018 that is discussed below. During the year ended December 31, 2018, the Company borrowed an additional $190,500. The balance of notes outstanding was $707,500 as of December 31, 2018 and the balance of the debt discount was $70,078.
On November 9, 2019 the Company and Ylimit, LLC entered into an amendment (“Ylimit Amendment One”) to the original secured convertible promissory note dated May 9, 2016 along with subsequent amendment and fundings that followed. Under the terms of Ylimit Amendment One, Ylimit extended maturity date of all outstanding convertible debt due to them by the company, to a new maturity date of February 09, 2020. Ylimit received no consideration for this amendment.
| F-11 |
| Table of Contents |
By verbal agreement Ylimit increased the Company’s borrowing limits by $175,000 and extended this amount of additional funding to the Company during the last three months of 2019 bring the total convertible note balance due to YLimit to a total of $882,500 as December 31, 2019. All note discount related to Ylimit was fully amortized as of December 31, 2019.
On February 9, 2020, the Company entered into another amendment with Ylimit (“Ylimit Amendment Two”) to further extend the maturity date of all of the Company’s outstanding debt to August 9, 2020 including the $175,000 that Ylimit funded in the fourth quarter of 2019. Ylimit received no consideration for the Ylimit Amendment Two.
During the year ended December 31, 2020, Ylimit provided another $453,708 in funding to the Company bringing their balance to $1,366,208 as of December 31, 2020. On January 5, 2021 the Company entered into Amendment Three to extend the maturity of all notes until February 9, 2022. Ylimit received no consideration for Amendment Three.
During the three months ended March 31, 2021, Ylimit invested another $12,000 on terms comparable to recent fundings.
(c) From September 1, 2017 to December 31, 2017, the Company issued convertible notes to Golock Capital, LLC (“Lender”) in the aggregate principal amount of $191,750 with an interest rate at 10% per annum and maturity dates between June 1, 2018 and August 31, 2018. The notes are convertible into shares of the Company’s common stock at prices between $0.015 and $0.02 per share. As additional consideration for the Lender to enter into these agreements with the Company, the Company issued warrants to the Lender to acquire in the aggregate 4,804,708 shares of the Company’s common stock at a weighted average exercise price of $0.014 per share. In addition, the Lender shall have the first right of refusal as to any future funding of Borrower in that Lender shall have the right to provide all or a portion of the funding upon the same terms as those offered in writing by any third party or contained in any private placement of borrower. The Lender, upon conversion, shall have piggyback registration rights for all of its common stock shares in any registration or post-effective amendment to any registration initiated by Borrower with the Securities and Exchange Commission. The balance of the notes outstanding and the related debt discount was $191,750 and $19,652, respectively, as of December 31, 2017.
On February 2, 2018, the Company issued a convertible note to Golock Capital, LLC (“Lender”) in the principal amount of $40,000 with an interest rate at 10% per annum and a maturity date of November 2, 2018. The note included an original issue discount of $5,000. The note is convertible into shares of the Company’s common stock at $0.015 per share. As additional consideration for the Lender to enter into this agreement with the Company, the Company issued warrants to the Lender to acquire in the aggregate 2,500,000 shares of the Company’s common stock at an exercise price of $0.015 per share that expire three years from the date of grant. The relative fair value of the warrants, the original issue discount, and the beneficial conversion feature totaling $40,000 was recorded as a debt discount and will be amortized to interest expense over the term of the note. On November 5, 2018, the Company amended the notes above by changing the conversion feature for the aggregate notes to be convertible into shares of common stock of the Company at the lower of (i) $0.015 per share or, (ii) 58% of the lowest closing bid price in the 20 trading days prior to the day that the Lender requests conversion. This feature gave rise to a derivative liability of $553,000 at date of issuance as discussed below. The amendment also increased the principal face amount of notes to include accrued interest, and an additional $43,250 was added to principal, which was recorded to financing costs. The aggregate balance of the notes outstanding, and the related debt discount was $302,067 and $0, respectively, as of December 31, 2018.
On April 29, 2019, Golock entered into an amendment with the Company to extend the maturity of the Notes until July 31, 2019. In return, Golock received several concessions. They received (a) a warrant to purchase 12,833,333 shares of the Company’s common stock for 48 months exercisable at a strike price of $.00475. The Company recorded a financing charge of $28,227 related to these warrants and (b) the conversion noted above was changed from 58% to 50% of the lowest closing bid price in the 20 trading days prior to that day that the Lender request conversion. During the year ending December 31, 2019 the Company issued new notes payable of $53,331 and $23,102 of notes and accrued interest were converted into 100,000,000 shares of common stock. The balance of the notes outstanding on December 31, 2019, was $339,010. As of December 31, 2019, $285,679 of these notes were past due. As of December 31, 2020 all of the Golock notes amounting to $339,011 were past due. As a result, Golock has assessed the Company additional penalties and interest pf $1,172,782. The Company has recorded this amount as an accrued liability as of March 31, 2021 and December 1, 2020. The Company disagrees with the accrued interest and penalties due to Golock and intends to litigate this amount if a settlement on a vastly reduced amount, cannot be reached.
| F-12 |
| Table of Contents |
(d) As of December 31, 2017 the Company had an outstanding convertible note payable of $61,000. During the year ended December 31, 2018, the Company entered into additional notes of $369,250. The convertible notes have interest rates ranging from 8% to 12% per annum, maturity dates ranging from August 21, 2018, to June 19, 2020, and are convertible into shares of common stock of the Company at discount rates between 38% and 50% of the lowest trading price for the Company s common stock during the prior twenty (20) trading day period, and for one lender, no lower than $0.035 per share. The issuance of notes with conversion features gave rise to derivative liabilities of $559,397 (see discussion below). As of December 31, 2018, the aggregate convertible notes balance to the five lenders was $426,964 and the related debt discount was $179,162. As of December 31, 2020 all $238,303 were past due.
During the year ended December 31, 2019, the Company entered into additional notes of $256,000, with interest rates from 10% to 12%, and maturity dates ranging from January 22, 2020, to August 2, 2020, at conversion terms comparable to the terms above. The issuance of notes with conversion features gave rise to derivative liabilities of $357,465 (see discussion below). In addition, On April 29, 2019, one of the lenders entered into an amendment with the Company to extend the maturity of the Notes until July 31, 2019. In return, the Company issued (a) a warrant to purchase 2,966,986 shares of the Company’s common stock for a period of 48 months exercisable at a strike price of $.00475 with a fair value of $5,934, and (b) the conversion price of outstanding notes was changed from $.015 to 50% of the lowest closing bid price in the 20 trading days prior to that day that the Lender request conversion. During the year ended December 31, 2019, convertible notes of $388,207 and accrued interest were converted into 540,276,078 shares of common stock. As of December 31, 2019, the aggregate convertible notes balance to the five lenders was $299,069 and the related debt discount was $ 33,667. As of December 31, 2019, $96,069 of these notes were past due.
In total, during 2019 convertible notes and accrued interest aggregating $411,309 were converted into 640,276,078 common shares with a fair value of $959,290 and recognized loss on settlement of debt of $548,029 during the year ended December 31, 2019. On December 31, 2019, the aggregate balance of the fair value of the notes outstanding was $1,564,080 and the related debt discount was $78,013. As of December 31, 2019, the above notes are convertible into 3,334,494,813 shares of common stock.
During the year ended December 31, 2020, $56,466 of the principal balance and $8,600 of interest was converted to 440,111,560 shares of common stock. The Company recorded a loss on the extinguishment of debt on these two conversions of $263,609. Additionally, the Company paid $4,400 to reduce the principal balance. These were the only note conversions during the year ended December 31, 2020.
(e) During the three months ended March 31, 2021, GHS Investments funded an 8%, $165,000 convertible promissory note maturing on November 16, 2021. The conversion price on the Note is fixed at .0171. The Company recorded a beneficial conversion feature of $106,765 upon the issuance of the Note and was immediately expensed in full.
(f) The Company issued a 10% convertible note to Baggett that contained various conversion features related to future Offerings of the Company. The Company recorded a note discount of $5,000 on the Note which was immediately expensed. Additionally, as well as a derivative liability of $45,262
Summary
The Company considered the current FASB guidance of “Contracts in Entity’s Own Stock” which indicates that any adjustment to the fixed amount (either conversion price or number of shares) of the instrument regardless of the probability of whether or not within the issuers’ control means the instrument is not indexed to the issuer’s own stock. Accordingly, the Company determined that the conversion prices of the Notes were not a fixed amount because they were either subject to an adjustment based on the occurrence of future offerings or events or the conversion price was variable. As a result, the Company determined that the conversion features of the Notes were not considered indexed to the Company’s own stock and characterized the fair value of the conversion features as derivative liabilities upon issuance. The Company determined that upon issuance of the Notes, the initial fair value of the embedded conversion feature was recorded as debt discount offsetting the fair value of the Notes and the remainder recorded as financing costs in the Consolidated Statement of Operations.
| F-13 |
| Table of Contents |
On March 31, 2021, the aggregate balance of the fair value of all convertible notes outstanding was $2,183,922 and the related debt discount was $-0-, or a net balance of $2,183,922. Of this amount, $620,714 in principal was past due. As of March 31, 2021, the above notes are convertible into 1,747,064,356 shares of common stock. Accrued interest on the convertible notes amounted to $494,972 as of March 31, 2021.
On December 31, 2020, the aggregate balance of the fair value of all convertible notes outstanding was $1,956,922 and the related debt discount was $-0-, or a net balance of $1,956,922. Of this amount, $620,714 in principal was past due. As of December 31, 2020, the above notes are convertible into 1,948,265,842 shares of common stock.
During the year ended December 31, 2019, the Company issued $484,331 of convertible notes whose conversion features created a derivative liability upon issuance with a fair value of $357,465 of which $218,637 was recorded as a debt discount, and the remaining $138,828 was recorded as a financing cost. During the year ended December 31, 2019, the amortization of debt discount was $389,793 which is included in financing costs on the Company’s statement of operations. The balance of the unamortized note discount on December 31, 2019 was $78,013.
NOTE 10 – DERIVATIVE LIABILITY
The FASB has issued authoritative guidance whereby instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The conversion prices of the Notes described in Note 6 were not a fixed amount because they were either subject to an adjustment based on the occurrence of future offerings or events or they were variable. Since the number of shares is not explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available to settle the conversion option. In accordance with the FASB authoritative guidance, the conversion features have been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations. As of March 31, 2021 and December 31, 2020, the derivative liabilities were valued using probability weighted option pricing models with the following assumptions:
|
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||
|
|
|
|
|
|
|
| ||
| Exercise Price |
| $ | 0.1175-0.02115 |
|
| $ | 0.00015–0.00018 |
|
| Stock Price |
|
| .0235 |
|
| $ | 0.0003 |
|
| Risk-free interest rate |
|
| .06 | % |
|
| .06 | % |
| Expected volatility |
|
| 204.20 |
|
|
| 236 | % |
| Expected life (in years) |
|
| 1.00 |
|
|
| 1.00 |
|
| Expected dividend yield |
|
| 0 | % |
|
| 0 | % |
| Fair Value: |
| $ | 812,349 |
|
| $ | 3,156,582 |
|
The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the future volatility for its common stock. The expected life of the conversion feature of the notes was based on the remaining term of the notes. The expected dividend yield was based on the fact that the Company has not customarily paid dividends in the past and does not expect to pay dividends in the future.
NOTE 11 – STOCKHOLDERS’ DEFICIT
On July 2, 2019, the Company filed a Certificate of Amendment (the “Charter Amendment”) to the Company’s Articles of Incorporation (as amended to date, the “Articles of Incorporation”) with the Secretary of State of the State of Nevada. The Charter Amendment increased the Company’s capitalization to 2,000,000,000 shares of Common Stock and 20,000,000 shares of Preferred Stock, of which, 5,000,000 were designated as Series A Convertible Preferred Stock.
| F-14 |
| Table of Contents |
Common stock
The Company has authorized 2,000,000,000 shares of $0.0001 par value common stock. As of March 31, 2021 and December 31, 2020 there were 1,211,495,162 and 1,211,495,162 shares of common stock issued and outstanding respectively.
Preferred Stock Series A
As of March 31, 2021 and December 31, 2020, the Company had 20,000,000 shares of $0.0001 par value preferred stock authorized and there were 4,126,776 shares of Series A Preferred Stock issued and outstanding.
On May 22, 2019, the Company authorized and designated a class of Series A Convertible Preferred Stock (“Series A Preferred Stock”), in accordance with a Certificate of Designation filed with the State of Nevada (the “Series A Designation”). It subsequently issued 4,126,776 restricted shares of Series A Preferred Stock to various employees and service providers to compensate and reward them for services and to incentivize them to provide continued service to the Company. The Series A Preferred Stock receives relative rights and preferences under terms and conditions set forth in the Certificate of Designation of the Preferred Stock.
Pursuant to the Series A Designation, each share of Series A Preferred Stock may be converted into 50 shares of common stock of the Company. The Series A Preferred Stockholders shall be entitled to share among dividends with the common stock shareholders of the Company on an as-converted basis. The Series A Preferred Stockholders shall vote with the common stock as a single class, on a 100 to 1 basis, such that for every share of Series A Preferred Stock held, such shares shall entitle the holder to cast 100 votes. The holders of the Series A Preferred Stock have no liquidation or redemption preference rights but get treated as common stockholders on an as converted basis.
The Company believes that the issuance of the Series A Preferred Stock was exempt from the registration requirements under the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act in that said transaction did not involve a public solicitation and said restricted shares were issued to only a small number of employees and consultants with an ongoing relationship with the Company.
The Company determined the fair value of the preferred shares to be $590,129 which is included as stock-based compensation in general and administrative expense on the Company’s statements of operations for the year ended December 31, 2019.
Warrants
No warrants were issued during the three ended March 31, 2021.
A summary of warrants is as follows:
|
|
| Number |
|
| Weighted |
| ||
|
|
| of |
|
| Average |
| ||
|
|
| Warrants |
|
| Exercise |
| ||
| Balance outstanding, December 31, 2018 |
|
| 8,004,708 |
|
|
| 0.014 |
|
| Warrants granted |
|
| 15,800,319 |
|
|
| .00475 |
|
| Warrants exercised |
|
| - |
|
|
| - |
|
| Warrants expired or forfeited |
|
| - |
|
|
| - |
|
| Balance outstanding, December 31, 2019 |
|
| 23,805,027 |
|
|
| 0.079 |
|
| Warrants granted |
|
| - |
|
|
| - |
|
| Warrants exercised |
|
| - |
|
|
| - |
|
| Balance outstanding, December 31, 2020 |
|
| 23,805,027 |
|
|
| 0.079 |
|
| Warrants expired or forfeited |
|
| (8,004,708 | ) |
|
| - |
|
| Balance outstanding and exercisable, March 31, 2021 |
|
| 15,800,319 |
|
| $ | 0.0079 |
|
| F-15 |
| Table of Contents |
Information relating to outstanding warrants on March 31, 2020, summarized by exercise price, is as follows:
|
|
|
| Outstanding and Exercisable |
| ||||||||||
|
|
|
|
|
|
| Weighted Average |
| |||||||
| Exercise Price Per Share |
|
| Shares |
|
| Life (Years) |
|
| Exercise Price |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
| $ | 0.004750 |
|
|
| 15,800,319 |
|
|
| 2.33 |
|
| $ | 0.00475 |
|
The weighted-average remaining contractual life of all warrants outstanding and exercisable on March 31, 2021 is 2.33 years. The outstanding and exercisable warrants outstanding on March 31, 2021, had no intrinsic value.
NOTE 12 – COMMITMENT AND CONTINGENCIES
Joint Venture Agreement – Music Reports, Inc.
On September 1, 2018, the Company entered into an initial joint venture (“JV”) agreement with Music Reports, Inc., (“MRI”). Music Reports (musicreports.com) will initially partner with VNUE to provide Performing Rights Organization (PRO) data to VNUE’s Soundstr MRT (music recognition technology) platform through its extensive Songdex database, and will eventually work with VNUE to integrate automated direct licensing capability and royalty payment and distribution into the Soundstr platform. The initial term of the JV is for nine (6) months and requires the Company to Pay MRI fifty percent (50%) of net revenue every quarter. As of March 31, 2021, no net revenue was generated from the JV.
Litigation
None
Artist Agreement
On October 27, 2015, the Company entered into an Artist Agreement with I Break Horses, a Swedish duo based in Stockholm. The Artist Agreement is effective October 27, 2015, and has a term lasting as long as I Break Horses artist recordings are available via the VNUE Service. Under the terms of the Artist Agreement, the Company shall handle rights clearing and distribution for I Break Horses recordings and receive 30% of the Net Income generated thereby. As of March 31, 2021, the Company had not earned any revenue under this agreement.
NOTE 13 – SUBSEQUENT EVENTS
On May 17, 2021, Ylimit LLC (“Ylimit”) converted $962,680 of their convertible debt into 58,151,174 shares of common stock at a conversion price of $0.014 and into 123,083 of Series A Preferred Stock at a price of $1.20 per shares. After the transaction, Ylimit had $743,269 in outstanding convertible notes and accrued interest due from the Company.
| F-16 |
| Table of Contents |
|
|
| Page |
|
| Audited Consolidated Financial Statements for the years ended December 31, 2020 and 2019 |
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|
|
| F-18 |
| |
|
|
|
|
|
| Consolidated Balance Sheets as of December 31, 2020 and 2019 |
| F-20 |
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|
|
|
| |
| Consolidated Statements of Operations for the years ended December 31, 2020 and 2019 |
| F-21 |
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|
|
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|
|
| Consolidated Statements of Stockholders' Deficit for the period ended December 31, 2020 and 2019 |
| F-22 |
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| Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019 |
| F-24 |
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| Notes to Consolidated Financial Statements as of December 31, 2020 and 2019 |
| F-25 |
|
| F-17 |
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of VNUE, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheet of VNUE, Inc. (the "Company") as of December 31, 2020, the related statement of operations, stockholders' equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor since 2020
Lakewood, CO
April 8, 2021
| F-18 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
VNUE, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of VNUE, Inc. (the "Company") as of December 31, 2019 and the related consolidated statements of operations, stockholders' deficit, and cash flows for the year then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2019, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company experienced a net loss and utilized cash from operations during the year ended December 31, 2019 and has a stockholders’ deficit as of that date. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1 to the consolidated financial statements. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
We have served as the Company's auditor since 2016.
Weinberg & Company P.A
Los Angeles, California
May 19, 2020
| F-19 |
| Table of Contents |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
|
|
|
|
|
|
|
| ||
| Assets |
| |||||||
| Current assets: |
|
|
|
|
|
| ||
| Cash |
| $ | 4,458 |
|
| $ | 52,096 |
|
| Prepaid expenses |
|
| 100,000 |
|
|
| - |
|
| Total current assets |
|
| 104,458 |
|
|
| 52,096 |
|
| Total assets |
| $ | 104,458 |
|
| $ | 52,096 |
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and Stockholders' Deficit | ||||||||
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable and accrued expenses |
| $ | 2,372,072 |
|
| $ | 1,018,145 |
|
| Shares to be issued |
|
| 247,707 |
|
|
| - |
|
| Accrued payroll-officers |
|
| 209,750 |
|
|
| 68,000 |
|
| Advances from former officer |
|
| 720 |
|
|
| 720 |
|
| Notes payable |
|
| 34,000 |
|
|
| 34,000 |
|
| Deferred revenue |
|
| 74,225 |
|
|
| - |
|
| Convertible notes payable, net |
|
| 1,956,922 |
|
|
| 1,486,067 |
|
| Purchase liability |
|
| 300,000 |
|
|
| 300,000 |
|
| Derivative liability |
|
| 3,156,582 |
|
|
| 922,509 |
|
| Total current liabilities |
|
| 8,351,979 |
|
|
| 3,829,441 |
|
| Total liabilities |
|
| 8,351,979 |
|
|
| 3,829,441 |
|
|
|
|
|
|
|
|
|
|
|
| Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stockholders' Deficit |
|
|
|
|
|
|
|
|
| Preferred stock, par value $0.0001: 20,000,000 shares authorized 4,126,776 issued and outstanding |
|
| 413 |
|
|
| 413 |
|
| Common stock, par value $0.0001, 2,000,000,000 shares authorized; 1,211,495,162 and 770,883,602 shares issued and outstanding, respectively |
|
| 121,149 |
|
|
| 77,088 |
|
| Additional paid-in capital |
|
| 8,386,593 |
|
|
| 8,099,346 |
|
| Common stock to be issued, 5,204,352 and 5,204,352 shares, respectively |
|
| - |
|
|
| 247,707 |
|
| Accumulated deficit |
|
| (16,755,676 | ) |
|
| (12,201,899 | ) |
| Total stockholders' deficit |
|
| (8,247,521 | ) |
|
| (3,777,345 | ) |
| Total Liabilities and Stockholders' Deficit |
| $ | 104,458 |
|
| $ | 52,096 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-20 |
| Table of Contents |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|
|
| For the year |
|
| For the year |
| ||
|
|
| Ended |
|
| Ended |
| ||
|
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
|
|
|
|
|
|
|
| ||
| Revenues - related party |
| $ | 22,474 |
|
| $ | 206,161 |
|
| Direct costs of revenue |
|
| 8,509 |
|
|
| 211,031 |
|
| Gross margin (loss) |
|
| 13,965 |
|
|
| (4,870 | ) |
| Operating expenses: |
|
|
|
|
|
|
|
|
| Research and development |
|
| - |
|
|
| 12,404 |
|
| General and administrative |
|
| 601,022 |
|
|
| 1,177,756 |
|
| Intangible asset impairment |
|
| - |
|
|
| 132,397 |
|
| Total costs and expenses |
|
| 601,022 |
|
|
| 1,322,557 |
|
| Operating loss |
|
| (587,058 | ) |
|
| (1,327,427 | ) |
| Other income (expense), net |
|
|
|
|
|
|
|
|
| Change in fair value of derivative liability |
|
| (2,234,073 | ) |
|
| 1,179,556 |
|
| Loss on the extinguishment of debt |
|
| (263,609 | ) |
|
| (532,529 | ) |
| Gain on settlement of obligations |
|
| - |
|
|
| 35,534 |
|
| Financing costs |
|
| (1,469,037 | ) |
|
| (755,232 | ) |
| Other income (expense), net |
|
| (3,966,719 | ) |
|
| (72,671 | ) |
| Net income (loss) |
| $ | (4,553,777 | ) |
| $ | (1,400,098 | ) |
|
|
|
|
|
|
|
|
|
|
| Net loss per common share - basic and diluted |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
| Basic and diluted |
|
| 1,135,193,463 |
|
|
| 447,194,161 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-21 |
| Table of Contents |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
| Par value $0.001 |
|
| Additional |
|
| Shares to be |
|
|
|
|
| |||||||||||||||
|
|
| Preferred Shares |
|
| Common Shares |
|
| Paid- in |
|
| Issued |
|
|
|
|
| ||||||||||||||||
|
|
| Number |
|
| Amount |
|
| Number |
|
| Amount |
|
| Capital |
|
| Amount |
|
| Deficit |
|
| Total |
| ||||||||
| Balance - December 31, 2018 |
|
| - |
|
|
| - |
|
|
| 105,635,816 |
|
| $ | 10,563 |
|
| $ | 6,493,070 |
|
| $ | 243,839 |
|
|
| (10,801,801 | ) |
|
| (4,054,329 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares issued upon conversion of notes payable |
|
|
|
|
|
|
|
|
|
| 640,276,078 |
|
|
| 64,028 |
|
|
| 895,262 |
|
|
|
|
|
|
|
|
|
|
| 959,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of Series A Preferred Stock |
|
| 4,127,776 |
|
|
| 413 |
|
|
|
|
|
|
|
|
|
|
| 589,716 |
|
|
|
|
|
|
|
|
|
|
| 590,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares issued for settlement of accounts payable to former officer |
|
|
|
|
|
|
|
|
|
| 11,428,571 |
|
|
| 1,143 |
|
|
| 29,714 |
|
|
|
|
|
|
|
|
|
|
| 30,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares issued for settlement of accounts payable |
|
|
|
|
|
|
|
|
|
| 541,912 |
|
|
| 54 |
|
|
| 650 |
|
|
|
|
|
|
|
|
|
|
| 704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares issued on conversion of accrued payroll to officers |
|
|
|
|
|
|
|
|
|
| 15,057,143 |
|
|
| 1,506 |
|
|
| 39,149 |
|
|
|
|
|
|
|
|
|
|
| 40,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gain on extinguishment of accrued payroll to officers recorded as contributed capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12,046 |
|
|
|
|
|
|
|
|
|
|
| 12,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares to be issued for financing cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,500 |
|
|
|
|
|
|
| 3,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares to be issued for services |
|
|
|
|
|
|
|
|
|
| 2,500,000 |
|
|
| 250 |
|
|
| 2,750 |
|
|
| 368 |
|
|
|
|
|
|
| 3,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares returned by former officer |
|
|
|
|
|
|
|
|
|
| (4,555,918 | ) |
|
| (456 | ) |
|
| 456 |
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Warrants issued for notes amendment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 36,533 |
|
|
|
|
|
|
|
|
|
|
| 36,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,400,098 | ) |
|
| (1,400,098 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, December 31, 2019 |
|
| 4,127,776 |
|
| $ | 413 |
|
|
| 770,883,602 |
|
| $ | 77,088 |
|
| $ | 8,099,346 |
|
| $ | 247,707 |
|
| $ | (12,201,899 | ) |
| $ | (3,777,345 | ) |
| F-22 |
| Table of Contents |
|
|
|
|
|
|
| Par value $0.001 |
|
| Additional |
|
| Shares to be |
|
|
|
|
| |||||||||||||||
|
|
| Preferred Shares |
|
| Common Shares |
|
| Paid- in |
|
| Issued |
|
|
|
|
| ||||||||||||||||
|
|
| Number |
|
| Amount |
|
| Number |
|
| Amount |
|
| Capital |
|
| Amount |
|
| Deficit |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
| Balance - December 31, 2019 |
|
| 4,126,776 |
|
| $ | 413 |
|
|
| 770,883,602 |
|
| $ | 77,088 |
|
| $ | 8,099,346 |
|
| $ | 247,707 |
|
| $ | (12,201,899 | ) |
| $ | (3,777,345 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| To reclassify shares to be issued to a liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (247,707 | ) |
|
|
|
|
|
| (247,707 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Conversion of notes payable to common shares |
|
|
|
|
|
|
|
|
|
| 422,572,017 |
|
|
| 42,257 |
|
|
| 277,817 |
|
|
|
|
|
|
|
|
|
|
| 320,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares issued to pay interest expense |
|
|
|
|
|
|
|
|
|
| 17,539,543 |
|
|
| 1,754 |
|
|
| 9,330 |
|
|
|
|
|
|
|
|
|
|
| 11,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares issued for services |
|
|
|
|
|
|
|
|
|
| 500,000 |
|
|
| 50 |
|
|
| 100 |
|
|
|
|
|
|
|
|
|
|
| 150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4,553,777 | ) |
|
| (4,553,777 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2020 |
|
| 4,126,776 |
|
| $ | 413 |
|
|
| 1,211,495,162 |
|
| $ | 121,149 |
|
| $ | 8,386,593 |
|
| $ | - |
|
| $ | (16,755,676 | ) |
| $ | (8,247,521 | ) |
The accompanying notes are an integral part of these financial statements
| F-23 |
| Table of Contents |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
| For the Year |
|
| For the Year |
| ||
|
|
| Ended |
|
| Ended |
| ||
|
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
| Cash Flows From Operating Activities: |
|
|
|
|
|
| ||
| Net income (loss) |
| $ | (4,553,777 | ) |
| $ | (1,400,098 | ) |
| Adjustments to reconcile net income to net cash provided by (used for) operating activities |
|
|
|
|
|
|
|
|
| Change in the fair value of derivatives |
|
| 2,234,073 |
|
|
| (1,179,556 | ) |
| Derivative value considered financing costs |
|
|
|
|
|
| 138,828 |
|
| Gain on the settlement of vendor obligations |
|
|
|
|
|
| (35,534 | ) |
| Loss on the extinguishment of debt |
|
|
|
|
|
| 532,529 |
|
| Amortization of debt discount |
|
| 78,013 |
|
|
| 389,793 |
|
| Amortization of intangible assets |
|
|
|
|
|
| 101,032 |
|
| Impairment of intangible assets |
|
|
|
|
|
| 132,397 |
|
| Warrants issued for financing costs |
|
|
|
|
|
| 36,533 |
|
| Issuance of preferred stock for services |
|
|
|
|
|
| 590,129 |
|
| Shares issued for financing costs |
|
| 253,194 |
|
|
| 3,500 |
|
| Shares issued for services |
|
| 100 |
|
|
| 3,368 |
|
| Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
| Gain on debt forgiveness |
|
|
|
|
|
| (15,500 | ) |
| Prepaid expenses |
|
| (100,000 | ) |
|
| 666 |
|
| Accounts payable and accrued interest |
|
| 1,395,177 |
|
|
| 132,008 |
|
| Shares to be issued |
|
|
|
|
|
|
|
|
| Deferred revenue |
|
| 74,225 |
|
|
| - |
|
| Accrued payroll officers |
|
| 100,500 |
|
|
| 68,000 |
|
| Net cash (used in) operating activities |
|
| (518,493 | ) |
|
| (501,905 | ) |
|
|
|
|
|
|
|
|
|
|
| Cash Flows From Investing Activities: |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Cash Flows From Financing Activities: |
|
|
|
|
|
|
|
|
| Proceeds from notes payable |
|
|
|
|
|
| 25,000 |
|
| Payoff of convertible note |
|
| (45,134 | ) |
|
| (30,000 | ) |
| Proceeds from the issuance of convertible notes |
|
| 515,989 |
|
|
| 540,810 |
|
| Net cash provided by investing activities |
|
| 470,855 |
|
|
| 535,810 |
|
|
|
|
|
|
|
|
|
|
|
| Net Increase (Decrease) In Cash |
|
| (47,638 | ) |
|
| 33,905 |
|
| Cash At The Beginning Of The Period |
|
| 52,096 |
|
|
| 18,191 |
|
| Cash At The End Of The Period |
| $ | 4,458 |
|
| $ | 52,096 |
|
|
|
|
|
|
|
|
|
|
|
| Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
| Cash paid for interest |
| $ | - |
|
| $ | - |
|
| Cash paid for income taxes |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
| Non-Cash Financing Activities |
|
|
|
|
|
|
|
|
| Common shares issued upon conversion of notes payable and accrued interest |
|
|
|
|
| $ | 959,290 |
|
| Common shares issued in settlement of accounts payable and accrued expenses |
| $ | - |
|
| $ | 31,561 |
|
| Common shares issued upon conversion of accrued payroll |
| $ | - |
|
| $ | 40,654 |
|
| Fair value of derivative created upon issuance of convertible debt recorded as debt discount |
| $ | - |
|
| $ | 218,637 |
|
| Capital contribution upon conversion of accrued payroll for officer/shareholder |
| $ | - |
|
| $ | 12,046 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-24 |
| Table of Contents |
YEARS ENDED DECEMBER 31, 2020 AND 2019
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
History and Organization
VNUE, Inc. (formerly Tierra Grande Resources, Inc.) (“VNUE”, “TGRI”, or the “Company”) was incorporated under the laws of the State of Nevada on April 4, 2006.
On May 29, 2015, VNUE, Inc. entered into a merger agreement with VNUE Washington, Inc. Pursuant to the terms of the Merger Agreement, all of the outstanding shares of any class or series of VNUE Washington were exchanged for an aggregate of 50,762,987 shares of TGRI common stock. As a result of the Merger, VNUE Washington became a wholly-owned subsidiary of the Company, and the transaction was accounted for as a reverse merger with VNUE Washington deemed the acquiring company for accounting purposes, and the Company deemed the legal acquirer.
The Company is developing technology driven solutions for Artists, Venues and Festivals to automate the capturing, publishing, and monetization of their content, as well as protection of their rights.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the year ended December 31, 2020 the Company incurred a net operating loss of $4,553,777 used cash in operations of $518,493 and had a stockholders’ deficit of $16,755,676 as of December 31, 2020. In addition we had negative working capital of $8,247,522. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The Company does not have any commitments for additional capital. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2020, consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.
On December 31, 2020, the Company had cash on hand of $4,458. In February 2021, the Company raised an additional $150,000 from the issuance of notes payable that was used for corporate operating purposes. Management estimates that the current funds on hand will be sufficient to continue operations through July, 2021. The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. Historically, the Company has been able to fund its operations from the proceeds of notes payable and convertible notes. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company can obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in the case of equity financing.
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Basis of Consolidation
The Company consolidates all wholly-owned and majority-owned subsidiaries in which the Company’s power to control exists. The Company consolidates the following subsidiaries and/or entities:
| Name of consolidated subsidiary or Entity |
| State or other jurisdiction of incorporation or organization |
| Date of incorporation or formation (date of acquisition/disposition, if applicable) |
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| VNUE Inc. (formerly TGRI) |
| The State of Nevada |
| April 4, 2006 (May 29, 2015) |
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| 100 | % |
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| VNUE Inc. (VNUE Washington) |
| The State of Washington |
| October 16, 2014 |
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| 100 | % |
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| VNUE LLC |
| The State of Washington |
| August 1, 2013 (December 3, 2014) |
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| 100 | % |
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.
The Company recognizes revenue on the sale CDs and USB drives that contain the recording of live concerts and made available to concert attendees immediately after the show and on-line. Revenue is recognized on the sale of a product when our performance obligation is completed which is when the risk of loss transfers to our customers and the collection of the receivable is reasonably assured, which generally occurs when the product is purchased.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. Significant estimates include the assumptions used for impairment testing of intangible assets, assumptions used to value the derivative liabilities, the valuation allowance for the deferred tax asset and the accruals for potential liabilities. Actual results could differ from these estimates.
Fair Value of Financial Instruments
The Company determines the fair value of its assets and liabilities based on the exchange price in U.S. dollars that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:
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| · | Level 1 — Quoted prices in active markets for identical assets or liabilities. |
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| · | Level 2 — Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
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| · | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
| F-26 |
| Table of Contents |
The carrying amounts of financial instruments such as cash, and accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments. The carrying values of our notes payable approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.
The fair value of the derivative liabilities of $3,156,582 and $922,509 on December 31, 2020, and December 31, 2019, respectively, were valued using Level 3 inputs.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not the net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.
Income (Loss) per Common Share
Basic net income (loss) per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed giving effect to all dilutive potential shares of Common Stock that were outstanding during the period. Diluted income (loss) per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income (loss) of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income (loss) per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. Dilutive potential shares of Common Stock consist of incremental shares of Common Stock issuable upon exercise of stock options. No dilutive potential shares of Common Stock were included in the computation of diluted net loss per share on December 31, 2020, because their impact was anti-dilutive. As of December 31, 2020, the Company had 23,805,027 outstanding warrants and 1,948,265,842 shares related to convertible notes payables respectively, which were excluded from the computation of net loss per share.
Intangible Assets
The Company accounts for intangible assets in accordance with the authoritative guidance issued by the FASB. Intangibles are valued at their fair market value and are amortized taking into account the character of the acquired intangible asset and the expected period of benefit. The Company evaluates intangible assets for impairment, at a minimum, on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated undiscounted future cash flows. Recoverability of intangible assets is measured by comparing their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors, including past operating results, budgets, economic projections, market trends, and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss. As of December 31, 2020 based on the assessment of Management, the Company determined that its intangible asset had been impaired.
| F-27 |
| Table of Contents |
Segments
The Company operates in one segment for the manufacture and distribution of our products. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in economic characteristics; nature of products and services; and procurement, manufacturing, and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations. The Company adopted ASC 842 on January 1, 2019. However, the adoption of the standard had no impact on the Company’s financial statements since all Company leases are month to month, or short-term rentals.
NOTE 3 – PREPAID EXPENSE
On Jan 9th, 2020, the Company entered into an agreement with recording and performance artist, Matchbox Twenty “MT Agreement”), to record its 2020 tour and sell limited edition double CD sets, download cards, and digital downloads. As part of the deal, the Company agreed to pay an advance of $100,000 against sales, to MT and its affiliated companies, which was paid in full in installments, with the last installment of $40,000 paid on March 4th. We have recorded this amount as a prepaid expense on our consolidated balance sheet as of December 31, 2020.
NOTE 4 – RELATED PARTY TRANSACTIONS
DiscLive Network
On July 10, 2017, the Company entered into a Licensing Agreement with RockHouse Live Media Productions, Inc., DBA “DiscLive” or “DiscLive Network” (“DiscLive”) to formalize the terms of the Strategic Alliance entered into by the Company with DiscLive on July 21, 2016. VNUE has acquired an exclusive license from DiscLive, for a period of three years unless earlier terminated under the Agreement, for the use of all its assets, including but not limited to the DiscLive brand, website (including eCommerce platform), intellectual property, inventory, equipment, trade secrets and anything related to its business of “instant live” recording. Under the terms of the Agreement, DiscLive granted the Company a worldwide exclusive license. In exchange for the license, DiscLive will receive a license fee equal to five percent (5%) of any sales derived from the sale and use of the products and services. DiscLive is controlled by our Chief Executive Officer. Revenues of $22,474 and $206,161 and direct cost of revenues of$8,509 and $211,031 during the years ended December 31, 2020, and 2019, respectively, were recorded using the assets licensed under this agreement. For the periods ended December 31, 2020 and 2019. The fees would have amounted to $1,124 and $10,308 respectively. Our Chief Executive Officer agreed to waive the right to receive these license fees for both years.
Accrued Payroll to Officers
Accrued payroll to officers was $209,750 and $68,000 respectively, as of December 31, 2020, and December 31, 2019, respectively. During the year ended December 31, 2019, the Company entered into a conversion and cancellation of a debt agreement with its Chief Executive Officer. The Company agreed to convert accrued payroll of $52,700 into 15,057,143 shares of the Company’s stock, valued at $40,654 using the closing market price of the Company’s stock on the date of the conversion and cancellation of debt agreements. The difference between the total accrued payroll converted of $52,700, and the market value of the shares issued of $40,654, was recorded as contributed capital of $12,046 in the consolidated statements of stockholders’ deficit for the year ended December 31, 2019.
The Chief Executive Officers’ compensation is $170,000 per year all of which was expensed during the years ended December 31, 2020 and 2019; of which $129,500 and $102,000 has been paid and $108,500 and $68,000 was outstanding as of December 31, 2020 and 2019, respectively.
| F-28 |
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Advances from Officers/Stockholders
From time to time, officers/stockholders of the Company advance funds to the Company for working capital purposes. During the year ended December 31, 2019, a former employee and stockholder agreed to forgive $14,000 owed by the Company. The Company recorded the $14,000 as a gain on the settlement of debt, leaving a remaining balance of $720 on December 31, 2019.
Transactions with Former Director and Officer
On September 15, 2017, the Company entered into an Advisory Agreement with Louis Mann (“MANN”), a former officer and director with the Company who previously resigned as an officer and director on August 26, 2015 after a short stint. He was re-appointed to the board on June 23, 2018, while continuing to serve in under the Advisory agreement. The Advisory Agreement provides for MANN’s continued and ongoing advisory services to the Company for nine (9) months and with automatic nine (9) months renewals unless terminated per the agreement. MANN is to receive $5,000 per month and 20,000 shares of common stock per month. Mann is still currently still engaged with the company, and serves as Executive Vice President as well as Director, as noted above.
As of December 31, 2018, $40,000 of cash compensation was owed to MANN under the Advisory Agreements and included in accounts payable and accrued expenses. On March 4, 2019, the Company and MANN entered into a conversion and cancellation of debt agreement relating to the $40,000 cash compensation balance outstanding on December 31, 2018. The Company issued 11,428,571 shares of common stock, at $0.0035 per share, as payment in full for the $40,000 balance outstanding on December 31, 2018. The difference between the total obligations of $40,000 that MANN converted, and the market value of the shares issued of $30,857, was recorded as a gain on settlement of obligations of $9,143 in other income in the consolidated statements of operations for the year ended December 31, 2019.
During the year ended December 31, 2019, the Company recorded $45,000 of compensation relating to the agreement and made payments of $3,750 leaving a balance owed to MANN of $41,250 on December 31, 2019, which is included in accounts payable and accrued expenses. In May 2019, the Company awarded MANN, 748,429 shares of Series A Preferred Stock.
During the year ended December 31, 2020, $60,000 in compensation was accrued for MANN and no payments were made to him.
NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payables are recognized initially at the transaction price and subsequently measured at the undiscounted amount of cash or other consideration expected to be paid. Accrued expenses are recognized based on the expected amount required to settle the obligation or liability.
The following table sets forth the components of the Company’s accrued liabilities on December 31, 2020, and December 31, 2019.
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| December 31, 2020 |
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| December 31, 2019 |
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| Accounts payable and accrued expense (includes $41,250 to a former officer and director at December 31, 2019, Note 4) |
| $ | 587,230 |
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| 577,115 |
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| Accrued interest |
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| 466,801 |
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| 271,621 |
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| Accrued interest and penalties Golock(a) |
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| 1,172,782 |
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| - |
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| Soundstr Obligation |
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| 145,259 |
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| 169,409 |
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| Total accounts payable and accrued liabilities |
| $ | 2,372,072 |
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| 1,018,145 |
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| (a) | The Company strongly disagrees with the accrued interest and penalties claimed by Golock in regard to their notes, and intends to arbitrate or litigate this amount if a settlement on a vastly reduced amount cannot be reached. |
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NOTE 6 – PURCHASE LIABILITY
On October 16, 2017, the Company entered into an agreement with PledgeMusic, Inc. (the “Seller”), whereby the Company acquired the digital live music distribution platform “Set.fm” from PledgeMusic. The purchase price for the acquisition was comprised of $50,000 paid in cash, and a purchase liability of $300,000, for an aggregate purchase price of $350,000. The Company assigned $350,000 of the purchase price to intellectual property, of which $116,668 was amortized in 2018. As of December 31, 2018, the Company recorded an impairment charge of the remaining balance of $204,165. The purchase liability is payable on the net revenues derived from VNUE’s live recording and content business and must be paid in full to the Seller no later than the three (3) year anniversary of the date of the agreement, or October 16, 2020. If the Company fails to pay the Seller the purchase liability on time, the Seller may request at any time within one hundred eighty days (180) days following the (3) year anniversary of the asset purchase agreement, that the Company immediately forfeit, convey, assign, and transfer to the Seller all or any of the Purchased Assets so requested by the Seller for no additional consideration. For the years ended December 31, 2019 and 2018, there was no net revenue derived from the acquired assets and accordingly, no payments were made on the earnout. The balance due on December 31, 2020 and 2019 was $300,000.
NOTE 7 – SHARES TO BE ISSUED
As of December 31, 2018, the Company had not yet issued 3,964,352 shares of common stock with a value of $243,839 for past services provided and for an acquisition. During the year ended December 31, 2019 the Company became obligated to issue an additional 240,000 shares of common, valued at $184, per the terms of a consulting agreement , and 1,000,000 shares of common stock valued at $3,500, as consideration for amending an existing convertible note. As of December 31, 2020 and 2019, the Company had not yet issued 5,204,352 shares of common stock with a value of $247,707.
NOTE 8 – NOTES PAYABLE -PAST DUE
On December 17, 2015, the Company issued a Promissory Note in the principal amount of $9,000. The note was due within 10 business days of the Company receiving notice of the effectiveness of its Form S-1 filed on February 22, 2016. Failure to make payment during that 10 business day period shall constitute an Event of Default, as a result of which the note will become immediately due and payable and the balance will bear interest at 7%. The Company’s Form S-1 was declared effective on March 8, 2016, and payment was due before March 22, 2016. The Company did not repay the note before March 22, 2016; therefore, the note is in default with an interest rate of 7%.
On April 30, 2019, the Company issued an unsecured Promissory Note in the principal amount of $25,000. The Note is due and payable on August 30, 2019, along with $5,000 worth of interest. The Promissory Note is past due, however, the maker of the Note has verbally agreed not to call a default.
During the years ended December 31, 2020 and 2019; the Company recorded $15,630 and $5,630, respectively, of accrued interest expense on these two Notes.
The balance of the Notes Payable outstanding was $34,000 and $9,000 as of December 31, 2020, and December 31, 2019, respectively and are past due.
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NOTE 9 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE, RELATED PARTIES
Convertible notes payable consist of the following:
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| $ | 43,500 |
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| Ylimit, LLC Convertible Notes (b) |
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| 1,336,208 |
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| 882,500 |
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| Golock Capital, LLC Convertible Notes(c) |
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| 339,011 |
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| 339,011 |
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| Other Convertible Notes(d) |
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| 238,203 |
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| 299,069 |
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| Total Convertible Notes |
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| 1,956,922 |
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| 1,564,080 |
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| Debt discount |
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| (78,013 | ) |
| Convertible notes, net |
| $ | 1,956,922 |
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| $ | 1,486,067 |
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(a) In August 2014, the Company issued a series of convertible notes with various interest rates ranging up to 10% per annum. The Note Conversion Price is determined as follows: (a) if the Note is converted upon the Next Equity Financing, an amount equal to 80% of the price paid per share paid by the investors in the Next Equity Financing; (b) if the Note is converted in the event of a Corporate Transaction, a price per share derived by dividing a “pre-money” valuation of $8,000,000 by the number of shares outstanding immediately prior to the time of such conversion, on a fully diluted basis; or (c) if the Note is converted as part of a Maturity Conversion, a price per unit derived by dividing a “pre-money” valuation of $8,000,000 by the total number of units (restricted and non-restricted) outstanding immediately prior to the time of such conversion, on a fully diluted basis. The notes are due and payable on demand at any time after the earlier of (i) 36 months following the note issuance or (ii) the consummation of a corporate transaction if not previously converted. The balance of the notes outstanding was $45,000 as of December 31, 2018. On March 4, 2019, a note holder elected to forgive and cancel their outstanding convertible note balance of $1,500, which the Company recorded as a gain on extinguishment of debt in the accompanying consolidated statement of operations. The balance of the notes outstanding was $43,500 as of December 31, 2019 of which $28,500 was due to related parties.
(b) On May 9, 2016, the Company issued a convertible note to YLimit, LLC in the principal amount of $100,000 with interest at 10% per annum and due on May 9, 2018. The note is secured by the Company’s rights, titles and interests in all the Company’s tangible and intangible assets, including intellectual property and proprietary software whether existing now or created in the future. On August 25, 2017, the Note was amended to authorize total borrowings on this Note to $517,000, The balance of the notes outstanding was $517,000 as of December 31, 2017 and the balance of the debt discount was $137,358.
On April 12, 2018, and again on August 15, 2018, the Company and Ylimit, LLC entered into an amendment to the original secured convertible promissory note. The amendments increased the borrowing limits by $190,500 to a total of $707,500, and extended the maturity date to May 9, 2019. In addition, the amendment on April 12, 2018 modified the conversion feature to state that all borrowings under the note will be converted at 75% of the per share stock price in the equity funding, but in no event shall the conversion price be less than $0.035 per share. This feature gave rise to a derivative liability of $135,900 during the period ended December 31, 2018 that is discussed below. During the year ended December 31, 2018, the Company borrowed an additional $190,500. The balance of notes outstanding was $707,500 as of December 31, 2018 and the balance of the debt discount was $70,078.
On November 9, 2019 the Company and Ylimit, LLC entered into an amendment (“Ylimit Amendment One”) to the original secured convertible promissory note dated May 9, 2016 along with subsequent amendment and fundings that followed. Under the terms of Ylimit Amendment One, Ylimit extended maturity date of all outstanding convertible debt due to them by the company, to a new maturity date of February 09, 2020. Ylimit received no consideration for this amendment.
By verbal agreement Ylimit increased the Company’s borrowing limits by $175,000 and extended this amount of additional funding to the Company during the last three months of 2019 bring the total convertible note balance due to YLimit to a total of $882,500 as December 31, 2019. All note discount related to Ylimit was fully amortized as of December 31, 2019.
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On February 9, 2020, the Company entered into another amendment with Ylimit (“Ylimit Amendment Two”) to further extend the maturity date of all of the Company’s outstanding debt to August 9, 2020 including the $175,000 that Ylimit funded in the fourth quarter of 2019. Ylimit received no consideration for the Ylimit Amendment Two.
During the year ended December 31, 2020, Ylimit provided another $453,708 in funding to the Company bringing their balance to $1,366,208 as of December 31, 2020. On January 5, 2021 the Company entered into Amendment Three to extend the maturity of all notes until February 9, 2022. Ylimit received no consideration for Amendment Three.
(c) From September 1, 2017 to December 31, 2017, the Company issued convertible notes to Golock Capital, LLC (“Lender”) in the aggregate principal amount of $191,750 with an interest rate at 10% per annum and maturity dates between June 1, 2018 and August 31, 2018. The notes are convertible into shares of the Company’s common stock at prices between $0.015 and $0.02 per share. As additional consideration for the Lender to enter into these agreements with the Company, the Company issued warrants to the Lender to acquire in the aggregate 4,804,708 shares of the Company’s common stock at a weighted average exercise price of $0.014 per share. In addition, the Lender shall have the first right of refusal as to any future funding of Borrower in that Lender shall have the right to provide all or a portion of the funding upon the same terms as those offered in writing by any third party or contained in any private placement of borrower. The Lender, upon conversion, shall have piggyback registration rights for all of its common stock shares in any registration or post-effective amendment to any registration initiated by Borrower with the Securities and Exchange Commission. The balance of the notes outstanding and the related debt discount was $191,750 and $19,652, respectively, as of December 31, 2017.
On February 2, 2018, the Company issued a convertible note to Golock Capital, LLC (“Lender”) in the principal amount of $40,000 with an interest rate at 10% per annum and a maturity date of November 2, 2018. The note included an original issue discount of $5,000. The note is convertible into shares of the Company’s common stock at $0.015 per share. As additional consideration for the Lender to enter into this agreement with the Company, the Company issued warrants to the Lender to acquire in the aggregate 2,500,000 shares of the Company’s common stock at an exercise price of $0.015 per share that expire three years from the date of grant. The relative fair value of the warrants, the original issue discount, and the beneficial conversion feature totaling $40,000 was recorded as a debt discount and will be amortized to interest expense over the term of the note. On November 5, 2018, the Company amended the notes above by changing the conversion feature for the aggregate notes to be convertible into shares of common stock of the Company at the lower of (i) $0.015 per share or, (ii) 58% of the lowest closing bid price in the 20 trading days prior to the day that the Lender requests conversion. This feature gave rise to a derivative liability of $553,000 at date of issuance as discussed below. The amendment also increased the principal face amount of notes to include accrued interest, and an additional $43,250 was added to principal, which was recorded to financing costs. The aggregate balance of the notes outstanding, and the related debt discount was $302,067 and $0, respectively, as of December 31, 2018.
On April 29, 2019, Golock entered into an amendment with the Company to extend the maturity of the Notes until July 31, 2019. In return, Golock received several concessions. They received (a) a warrant to purchase 12,833,333 shares of the Company’s common stock for 48 months exercisable at a strike price of $.00475. The Company recorded a financing charge of $28,227 related to these warrants and (b) the conversion noted above was changed from 58% to 50% of the lowest closing bid price in the 20 trading days prior to that day that the Lender request conversion. During the year ending December 31, 2019 the Company issued new notes payable of $53,331 and $23,102 of notes and accrued interest were converted into 100,000,000 shares of common stock. The balance of the notes outstanding on December 31, 2019, was $339,010. As of December 31, 2019, $285,679 of these notes were past due. As of December 31, 2020 all of the Golock notes amounting to $339,011 were past due. As a result Golock has assessed the Company additional penalties and interest pf $1,172,782. The Company has recorded this amount as an accrued liability as of December 1, 2020. The Company disagrees with the accrued interest and penalties due to Golock and intends to litigate this amount if a settlement on a vastly reduced amount, cannot be reached.
(d) As of December 31, 2017 the Company had an outstanding convertible note payable of $61,000. During the year ended December 31, 2018, the Company entered into additional notes of $369,250. The convertible notes have interest rates ranging from 8% to 12% per annum, maturity dates ranging from August 21, 2018, to June 19, 2020, and are convertible into shares of common stock of the Company at discount rates between 38% and 50% of the lowest trading price for the Company s common stock during the prior twenty (20) trading day period, and for one lender, no lower than $0.035 per share. The issuance of notes with conversion features gave rise to derivative liabilities of $559,397 (see discussion below). As of December 31, 2018, the aggregate convertible notes balance to the five lenders was $426,964 and the related debt discount was $179,162. As of December 31, 2020 all $238,303 were past due.
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During the year ended December 31, 2019, the Company entered into additional notes of $256,000, with interest rates from 10% to 12%, and maturity dates ranging from January 22, 2020, to August 2, 2020, at conversion terms comparable to the terms above. The issuance of notes with conversion features gave rise to derivative liabilities of $357,465 (see discussion below). In addition, On April 29, 2019, one of the lenders entered into an amendment with the Company to extend the maturity of the Notes until July 31, 2019. In return, the Company issued (a) a warrant to purchase 2,966,986 shares of the Company’s common stock for a period of 48 months exercisable at a strike price of $.00475 with a fair value of $5,934, and (b) the conversion price of outstanding notes was changed from $.015 to 50% of the lowest closing bid price in the 20 trading days prior to that day that the Lender request conversion. During the year ended December 31, 2019, convertible notes of $388,207 and accrued interest were converted into 540,276,078 shares of common stock. As of December 31, 2019, the aggregate convertible notes balance to the five lenders was $299,069 and the related debt discount was $ 33,667. As of December 31, 2019, $96,069 of these notes were past due.
In total, during 2019 convertible notes and accrued interest aggregating $411,309 were converted into 640,276,078 common shares with a fair value of $959,290 and recognized loss on settlement of debt of $548,029 during the year ended December 31, 2019. On December 31, 2019, the aggregate balance of the fair value of the notes outstanding was $1,564,080 and the related debt discount was $78,013. As of December 31, 2019, the above notes are convertible into 3,334,494,813 shares of common stock.
During the year ended December 31, 2020, $56,466 of the principal balance and $8,600 of interest was converted to 440,111,560 shares of common stock. The Company recorded a loss on the extinguishment of debt on these two conversions of $263,609. Additionally, the Company paid $4,400 to reduce the principal balance. These were the only note conversions during the year ended December 31, 2020.
Summary
On December 31, 2020, the aggregate balance of the fair value of all convertible notes outstanding was 1,956,922 and the related debt discount was $-0-, or a net balance of $1,956,922. Of this amount, $620,714 in principal was past due. As of December 31, 2020, the above notes are convertible into 1,948,265,842 shares of common stock.
The Company considered the current FASB guidance of “Contracts in Entity’s Own Stock” which indicates that any adjustment to the fixed amount (either conversion price or number of shares) of the instrument regardless of the probability of whether or not within the issuers’ control means the instrument is not indexed to the issuer’s own stock. Accordingly, the Company determined that the conversion prices of the Notes were not a fixed amount because they were either subject to an adjustment based on the occurrence of future offerings or events or the conversion price was variable. As a result, the Company determined that the conversion features of the Notes were not considered indexed to the Company’s own stock and characterized the fair value of the conversion features as derivative liabilities upon issuance. The Company determined that upon issuance of the Notes, the initial fair value of the embedded conversion feature was recorded as debt discount offsetting the fair value of the Notes and the remainder recorded as financing costs in the Consolidated Statement of Operations. The discount is being amortized using the effective interest rate method over the life of the debt instruments.
The balance of the unamortized note discount on December 31, 2017 was $198,025. During the year ended December 31, 2018, the Company issued $583,750 of convertible notes whose conversion features created a derivative liability upon issuance with a fair value of $1,329,389 of which $483,635 was recorded as a debt discount, and the remaining $845,754 was recorded as a financing cost. During the year ended December 31, 2018, the amortization of debt discount was $432,419 which is included in financing costs on the Company’s statement of operations. The balance of the unamortized note discount on December 31, 2018 was $249,241.
During the year ended December 31, 2019, the Company issued $484,331 of convertible notes whose conversion features created a derivative liability upon issuance with a fair value of $357,465 of which $218,637 was recorded as a debt discount, and the remaining $138,828 was recorded as a financing cost. During the year ended December 31, 2019, the amortization of debt discount was $389,793 which is included in financing costs on the Company’s statement of operations. The balance of the unamortized note discount on December 31, 2019 was $78,013.
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| Table of Contents |
NOTE 10 – DERIVATIVE LIABILITY
The FASB has issued authoritative guidance whereby instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The conversion prices of the Notes described in Note 6 were not a fixed amount because they were either subject to an adjustment based on the occurrence of future offerings or events or they were variable. Since the number of shares is not explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available to settle the conversion option. In accordance with the FASB authoritative guidance, the conversion features have been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations. As of December 31, 2020 and 2019, the derivative liabilities were valued using probability weighted option pricing models with the following assumptions:
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| December 31, 2020 |
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| December 31, 2019 |
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| Exercise Price |
| $ | 0.0015-0.0018 |
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| $ | 0.00015–0.00018 |
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| Stock Price |
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| .0114 |
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| $ | 0.0003 |
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| Risk-free interest rate |
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| .17 | % |
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| 1.59 | % |
| Expected volatility |
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| 737.80 |
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| 236 | % |
| Expected life (in years) |
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| 1.00 |
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| 1.00 |
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| Expected dividend yield |
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| 0 | % |
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| 0 | % |
| Fair Value: |
| $ | 3,156,582 |
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| $ | 922,509 |
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The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the future volatility for its common stock. The expected life of the conversion feature of the notes was based on the remaining term of the notes. The expected dividend yield was based on the fact that the Company has not customarily paid dividends in the past and does not expect to pay dividends in the future.
During the year ended December 31, 2019, the Company recorded derivative liabilities of $357,465 related to the issuance of certain new convertible notes, a modification of $189,186 relating to an additional derivative, and recognized $1,179,556 as other income, which represented the net change in the value of the derivative liability at December 31, 2019.
NOTE 11 – STOCKHOLDERS’ DEFICIT
On July 2, 2019, the Company filed a Certificate of Amendment (the “Charter Amendment”) to the Company’s Articles of Incorporation (as amended to date, the “Articles of Incorporation”) with the Secretary of State of the State of Nevada. The Charter Amendment increased the Company’s capitalization to 2,000,000,000 shares of Common Stock and 20,000,000 shares of Preferred Stock, of which, 5,000,000 were designated as Series A Convertible Preferred Stock.
Common stock
The Company has authorized 2,000,000,000 shares of $0.0001 par value common stock. As of December 31, 2020 and December 31, 2019 there were 1,211,495,162 and 770,883,062 shares of common stock issued and outstanding respectively.
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| Table of Contents |
Common stock returned by a director or officer
During the year ended December 31, 2019, a former Company director voluntarily returned 4,555,918 shares of Company common stock to Treasury. These shares were valued at par value of $456 and decreased common stock and increased paid-in capital by the same amount, so the transaction had no impact on the Company’s equity.
Shares issued for services
During the year ended December 31, 2020, the Company issued 500,000 shares to the vendor who supplied consulting services to the Company. The Company recorded consulting expense of $150 related to this issuance.
During the year ended December 31, 2019, the Company issued 2,500,000 shares to the vendor who supplied consulting services to the Company. The Company recorded consulting expense of $3,368 related to this issuance.
Shares issued to retire trade debt
During the year ended December 31, 2019, the Company reached agreement with a vendor to retire approximately $27,096 in debt at a price of $0.05 per share and issued the vendor 541,912 shares pursuant to the agreement. At the time of the settlement of the debt the Company’s common stock was trading at a price of $.0013, so the Company recognized a profit of $26,391 upon the extinguishment of the debt
Preferred Stock Series A
As of December 31, 2020 and 2019, the Company had 20,000,000 shares of $0.0001 par value preferred stock authorized and there were 4,126,776 shares of Series A Preferred Stock issued and outstanding.
On May 22, 2019, the Company authorized and designated a class of Series A Convertible Preferred Stock (“Series A Preferred Stock”), in accordance with a Certificate of Designation filed with the State of Nevada (the “Series A Designation”). It subsequently issued 4,126,776 restricted shares of Series A Preferred Stock to various employees and service providers to compensate and reward them for services and to incentivize them to provide continued service to the Company. The Series A Preferred Stock receives relative rights and preferences under terms and conditions set forth in the Certificate of Designation of the Preferred Stock.
Pursuant to the Series A Designation, each share of Series A Preferred Stock may be converted into 50 shares of common stock of the Company. The Series A Preferred Stockholders shall be entitled to share among dividends with the common stock shareholders of the Company on an as-converted basis. The Series A Preferred Stockholders shall vote with the common stock as a single class, on a 100 to 1 basis, such that for every share of Series A Preferred Stock held, such shares shall entitle the holder to cast 100 votes. The holders of the Series A Preferred Stock have no liquidation or redemption preference rights but get treated as common stockholders on an as converted basis.
The Company believes that the issuance of the Series A Preferred Stock was exempt from the registration requirements under the Securities Act of 1933, as amended pursuant to Section 4(a)(2) of the Act in that said transaction did not involve a public solicitation and said restricted shares were issued to only a small number of employees and consultants with an ongoing relationship with the Company.
The Company determined the fair value of the preferred shares to be $590,129 which is included as stock-based compensation in general and administrative expense on the Company’s statements of operations for the year ended December 31, 2019.
Warrants
No warrants were issued during the year ended December 31, 2020.
During the year ended December 31, 2019, the Company issued 15,800,319 warrants to two convertible noteholders as consideration for extending the term of their convertible notes. The warrants are exercisable for a period of four years at a strike price of $0.00475. As a result of the issuance of these warrants, the company recorded a financing expense of $36,533.
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| Table of Contents |
A summary of warrants for the years ended December 31, 2020 and December 31, 2019, is as follows:
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| Number |
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| Weighted |
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| of |
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| Average |
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| Warrants |
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| Exercise |
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| Balance outstanding, December 31, 2018 |
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| 8,004,708 |
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| 0.014 |
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| Warrants granted |
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| 15,800,319 |
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| .00475 |
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| Warrants exercised |
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| - |
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| - |
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| Warrants expired or forfeited |
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| - |
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| - |
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| Balance outstanding, December 31, 2019 |
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| 23,805,027 |
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| 0.079 |
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| Warrants granted |
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| - |
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| - |
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| Warrants exercised |
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| - |
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| - |
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| Warrants expired or forfeited |
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| - |
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| - |
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| Balance outstanding and exercisable, December 31, 2020 |
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| 23,805,027 |
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| $ | 0.0079 |
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Information relating to outstanding warrants on December 31, 2020, summarized by exercise price, is as follows:
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| Outstanding and Exercisable |
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| Weighted Average |
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| Exercise Price Per Share |
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| Shares |
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| Life (Years) |
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| Exercise Price |
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| $ | 0.010-0.015 |
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| 8,004,708 |
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| 0.14 |
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| $ | 0.014 |
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| $ | 0.004750 |
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| 15,800,319 |
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| 2.58 |
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| $ | 0.00475 |
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The weighted-average remaining contractual life of all warrants outstanding and exercisable on December 31, 2020, is .96 years. The outstanding and exercisable warrants outstanding on December 31, 2020, had no intrinsic value.
NOTE 12 – COMMITMENT AND CONTINGENCIES
Joint Venture Agreement – Music Reports, Inc.
On September 1, 2018, the Company entered into an initial joint venture (“JV”) agreement with Music Reports, Inc., (“MRI”). Music Reports (musicreports.com) will initially partner with VNUE to provide Performing Rights Organization (PRO) data to VNUE’s Soundstr MRT (music recognition technology) platform through its extensive Songdex database, and will eventually work with VNUE to integrate automated direct licensing capability and royalty payment and distribution into the Soundstr platform. The initial term of the JV is for nine (6) months and requires the Company to Pay MRI fifty percent (50%) of net revenue every quarter. As of December 31, 2020, no net revenue was generated from the JV.
Litigation
None
Artist Agreement
On October 27, 2015, the Company entered into an Artist Agreement with I Break Horses, a Swedish duo based in Stockholm. The Artist Agreement is effective October 27, 2015, and has a term lasting as long as I Break Horses artist recordings are available via the VNUE Service. Under the terms of the Artist Agreement, the Company shall handle rights clearing and distribution for I Break Horses recordings and receive 30% of the Net Income generated thereby. As of December 31, 2020, the Company had not earned any revenue under this agreement.
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| Table of Contents |
NOTE 13 – INCOME TAXES
Reconciliation between the expected federal income tax rate and the actual tax rate is as follows:
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| Year Ended December 31, |
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| 2020 |
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| 2019 |
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| Federal statutory tax rate |
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| 21 | % |
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| 21 | % |
| State tax, net of federal benefit |
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| 6 | % |
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| 6 | % |
| Total tax rate |
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| 27 | % |
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| 27 | % |
| Allowance |
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| (27 | )% |
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| (27 | )% |
| Effective tax rate |
| - | % |
| - | % | ||
The following is a summary of the deferred tax assets:
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| Year Ended December 31, |
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| 2020 |
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| 2019 |
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| Net operating loss carryforwards |
| $ | 3,060,000 |
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| 2,434,000 |
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| Accrued compensation |
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| - |
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| - |
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| Deferred tax asset |
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| 3,060,000 |
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| 2,434,000 |
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| Valuation allowance |
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| (3,060,000 | ) |
|
| (2,434,000 | ) |
| Net deferred tax asset |
| $ | - |
|
| $ | - |
|
The Company has no tax provision for any period presented due to our history of operating losses. As of December 31, 2020, the Company had estimated net operating loss carry forwards of approximately $11,333,000 that may be available to reduce future years’ taxable income through 2032 subject to Section 382 limitations. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as management has determined that their realization is not likely to occur and accordingly, the Company has recorded a valuation allowance for the full value of the deferred tax asset relating to these tax loss carry-forwards. Additionally, the Company has not filed tax returns, therefore the potential realizability of this loss in future periods is indeterminable.
The Company adopted accounting rules which address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under these rules, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. These accounting rules also provide guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2017 no liability for unrecognized tax benefits was required to be recorded.
NOTE 14 – SUBSEQUENT EVENTS
In February 2021, the Company entered into a $165,000 8% Convertible Note Agreement with an accredited investor that matures on November 16, 2021. The Note carried an original issue discount (OID) of 10% so the amount funded to the Company was $150,000.The note contains a conversion Price shall equal $.0171 (fixed price equaling 90% of the lowest variable weighted average price (“VWAP”) for 10 days preceding the Issue Date) (the “Fixed Conversion Price”), subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
| ITEM 13. | OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. |
The following table sets forth the expenses payable by the registrant, in connection with the sale of Common Stock being registered under this registration statement. All amounts shown are estimates except for the SEC registration fee.
| SEC Registration fee |
| $ | 272.75 |
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| Legal fees and expenses |
| $ |
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| Accountant’s fees and expenses |
| $ |
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| Transfer Agent fees and expenses |
| $ |
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| Miscellaneous |
| $ |
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| Total |
| $ |
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| ITEM 14. | INDEMNIFICATION OF DIRECTORS AND OFFICERS. |
Neither our articles of incorporation, nor our bylaws, prevent us from indemnifying our officers, directors and agents to the extent permitted under the Nevada Revised Statutes (“NRS”). NRS Section 78.7502, provides that a corporation may indemnify any director, officer, employee or agent of a corporation against expenses, including fees, actually and reasonably incurred by him in connection with any defense to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to Section 78.7502(1) or 78.7502(2), or in defense of any claim, issue or matter therein.
NRS 78.7502(1) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
NRS Section 78.7502(2) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
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| Table of Contents |
NRS Section 78.747 provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.
Our charter provides that we will indemnify our directors, officers, employees and agents to the extent and in the manner permitted by the provisions of the NRS, as amended from time to time, subject to any permissible expansion or limitation of such indemnification, as may be set forth in any stockholders’ or directors’ resolution or by contract. Any repeal or modification of these provisions approved by our stockholders will be prospective only and will not adversely affect any limitation on the liability of any of our directors or officers existing as of the time of such repeal or modification. We are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the NRS would permit indemnification.
| ITEM 15. | RECENT SALES OF UNREGISTERED SECURITIES. |
Over the past three years, we have issued and sold the following securities without registration under the Securities Act:
The offers, sales, and issuances of the securities described above were exempt from the registration requirements under the Securities Act, in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, including Regulation D promulgated thereunder, regarding transactions by an issuer not involving a public offering. All purchasers of securities in the above transactions represented that they were accredited investors and were acquiring the securities for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof and that they could bear the risks of the investment and could hold the securities for an indefinite period of time. The purchasers received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration statement or an available exemption from the registration under the Securities Act. All certificates representing the securities in the transactions described in this Item 15 included appropriate legends setting forth that the securities had not been offered or sold pursuant to a registration statement and describing the applicable restrictions on transfer of the securities.
| II-2 |
| Table of Contents |
| ITEM 16. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. |
(a) Exhibits.
See the Exhibit Index attached to this registration statement, which is incorporated by reference herein.
(b) Financial Statement Schedules.
All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions, or are inapplicable, and therefore have been omitted.
| Exhibit Number |
| Description of Document |
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| 5.1 |
| To be filed |
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| Form of Artist Agreement by and between VNUE, Inc. and Artist dated January 9, 2020 | |
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___________
* Filed herein
| (1) | Included as an exhibit with our Form SB-2 filed October 13, 2006. |
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| (2) | Included as an exhibit with our Form 8-K filed February 1, 2011. |
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| (3) | Included as an exhibit with our Form 8-K filed April 11, 2013. |
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| (4) | Included as an exhibit with our Form 8-K filed on July 14, 2017. |
| II-3 |
| Table of Contents |
| ITEM 17. | UNDERTAKINGS. |
The undersigned Registrant hereby undertakes:
(A) (1) To file, during any period in which offers, or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(B) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
| II-4 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, thereunto duly authorized in the City of New York, State of New York on June 23, 2021.
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| VNUE, INC. |
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| Date: June 23, 2021 | By: | /s/ Zach Bair |
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| Zach Bair |
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| Chief Executive Officer |
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| (Principal Executive Officer) |
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Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| Signature |
| Title |
| Date |
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| /s/ Zach Bair |
| Chairman, Chief Executive Officer and Principal |
| June 23, 2021 |
| Zach Bair |
| Accounting Officer |
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| /s/ Anthony Cardenas |
| Director, Chief Financial Officer and Vice President of Artist Development |
| June 23, 2021 |
| Anthony Cardenas |
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| /s/ Louis Mann |
| Director, Executive Vice President |
| June 23, 2021 |
| Louis Mann |
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| II-5 |
EXHIBIT 10.2
EXHIBIT 10.3
BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT
This bill of sale and assignment and assumption agreement is entered into on April 23th, 2018, between VNUE, Inc., a Nevada corporation (the “Buyer”), and MusicPlay Analytics, LLC (d/b/a Soundstr, an Ohio LLC. (the “Seller”).
The Seller owns and operates a business known as MusicPlay Analytics (a.k.a. “Soundstr”, the “Business”).
The Seller has agreed to sell and the Buyer has agreed to purchase the Purchased
Assets (as defined below).
Seller has agreed to join in this agreement for the purpose of making certain representations and agreements, and is fully authorized to do so.
Therefore, the parties agree as follows:
1. Sale of the Purchased Assets; Assumption of the Assumed Contracts; Excluded Assets.
(a) Subject to the provisions set forth in this agreement, as of midnight at the beginning of the date of this agreement (the “Effective Time”), the Seller hereby sells, conveys, assigns, and transfers to the Buyer all of Seller’s right, title and interest in, to and under the assets set forth on Schedule 1 to the extent that such assets exist as of the Effective Time and exclusively relate to the Business (the “Purchased Assets”) free and clear of any and all liens and encumbrances, and the Buyer hereby accepts the sale, conveyance, assignment, and transfer of the Purchased Assets and assumes the Buyer’s obligations under the contracts listed on Schedule 1 (the “Assumed Contracts and Obligations”).
(b) Other than the Purchased Assets, the Buyer expressly understands and agrees that it is not purchasing or acquiring, and the Seller is not selling or assigning, any other assets or properties of Seller, and all such other assets and properties shall be excluded from the Purchased Assets.
2. No Other Assumption of Liabilities. Except for obligations and liabilities arising from or related to the Purchased Assets and Assumed Contracts and Obligations listed on Schedule 1 arising after the Effective Time, the Buyer does not assume any obligation or liability of the Seller arising out of or related to the Business or the Purchased Assets arising prior to the Effective Time, and the Seller will continue to be liable for any and all liabilities of the Seller other than the Assumed Contracts and Obligations noted in Schedule 1. The Buyer does not assume any liability under the Assumed Contracts and Obligations arising before the Effective Time. Notwithstanding anything else herein to the contrary, the Seller will not be responsible for any liability that arises from the Buyer’s utilization of the Purchased Assets after the Effective Time, or issues that arose before the Effective Time but were not remedied.
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3. Purchase Price. The purchase price of the Assets is as follows: 2,275,000 (two- million, two-hundred and seventy-five thousand) shares of VNUE common stock, issued to Soundstr designees within 10 business days of Effective Time; and VNUE will pay via cash or other settlement means $234,487,19, with a margin of error of + or – 5%, of Soundstr’s debt as listed on Exhibit B of Schedule 1 within 60 days of closing (the “Purchase Price”).
4. Representations and Warranties. The Seller represents and warrants to the Buyer that all of the representations and warranties set forth on Schedule 3 are true and correct in all respects as of the date of this agreement. Any damages stemming from a breach of this Agreement by the Seller shall be capped at the amount of the Adjusted Purchase Price and in no event shall the Seller be liable for any punitive, incidental, consequential, special or indirect damages, including loss of future revenue or income, loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement, or diminution of value or any damages based on any type of multiple. Seller shall not be liable under this agreement for any damages, losses or claims based upon or arising out of any inaccuracy in or breach of any of the representations or warranties of Seller contained on Schedule 3 of this Agreement if Buyer had actual or constructive knowledge of such inaccuracy or breach prior to the Effective Time. For purposes hereof, “Adjusted Purchase Price” shall mean the shares of VNUE common stock US dollar value of further VNUE shares issued by Buyer on behalf of Seller to settled debts referenced in Section 3, above. The Buyer represents and warrants to the Seller that all of the representations and warranties set forth on Schedule 4 are true and correct in all respects as of the date of this agreement. No Other Representations or Warranties, except for the representations and warranties contained in this Section 4, neither Buyer, Seller, Seller’s investors or shareholders, nor any other person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Buyer or Seller.
5. Confidentiality. As further consideration for the Purchase Price, the Seller and the Buyer agree to abide by the confidentiality obligations set forth on Schedule 2.
6. Proration of Expenses. Any costs associated with operating the Business in the ordinary course, including but not limited to server and/or hosting costs, or similar charges, payable with respect to the period in which the Effective Time falls will be prorated based on the actual number of days applicable to the pre-Effective Time. The Seller will be liable for the prorated amount of all such expenses during the period through the Effective Time, and the Buyer will be liable for the prorated amount of all such expenses during the period after the Effective Time.
7. Certain Obligations of Seller. Seller agrees to provide necessary consulting resource, at Seller’s cost, to be completed within 30 days of Effective Time, to (a) transition necessary technology to VNUE banking information; Soundstr to assist on procuring outside development support to help update code to the latest (or forthcoming) Apple and/or Android mobile operating system release(s); (b) transfer development account/code ownership to VNUE; (c) and once these items are complete, provide reasonable and customary technical support for 90 days after items (a) through (d) are completed.
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8. Indemnification. Subject to the other terms and conditions of this Section 8, Buyer and Seller, including investors and/or shareholders, jointly and severally, shall defend, indemnify, and hold harmless each other from and against all claims, judgments, demands, and losses arising from or relating to:
A. any inaccuracy in or breach of any of the representations or warranties of Buyer or Seller, including investors and/or shareholders contained in this Agreement or any document to be delivered hereunder;
B. or any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Buyer or Seller pursuant to this Agreement or any document to be delivered under this Agreement.
9. Survival. Except as otherwise provided in this agreement, the representations and promises of the parties contained in this agreement will survive (and not be affected in any respect by) the Effective Time for the applicable statute of limitations as well as any investigation conducted by any party and any information which any party may receive.
10. Further Actions. At any time and from time to time after the date of this agreement: (1) the Seller shall execute and deliver or cause to be executed and delivered to the Buyer such other instruments and take such other action, all as the Buyer may reasonably request, in order to carry out the intent and purpose of this agreement; and (2) the Buyer shall execute and deliver or cause to be executed and delivered to the Seller such other instruments and take such other action, all as the Seller may reasonably request, in order to carry out the intent and purpose of this agreement including but not limited to assistance in recommending potential desired tech and development resource, transferring of any assets, etc. for the period of 1 calendar year from execution date.
11. Governing Law; Venue. This agreement and the transactions contemplated hereby will be construed in accordance with and governed by the internal laws (without reference to choice or conflict of laws principles) of the State of New York. Any suit, action, or other proceeding brought against any of the parties to this agreement or any dispute arising out of this agreement or the transactions contemplated hereby must be brought either in the courts sitting in New York County, New York, or in the United States District Court for the District of New York and by its execution and delivery of this agreement, each party accepts the jurisdiction of such courts and waives any objections based on personal jurisdiction or venue.
12. Assignment. No party may assign either this agreement or any of its rights, interests, or obligations hereunder without the prior written approval of each other party, except that the Buyer may assign any or all of its rights under this agreement, in whole or in part, without obtaining the consent or approval of any other party, (1) to any current or future affiliate of the Buyer, (2) to any entity into which the Buyer may be merged or consolidated, (3) in connection with any acquisition, restructuring, merger, conversion, or consolidation to which the Buyer may be a party, or (4) to a lender to the Buyer or its affiliates as collateral security for current or future obligations owed by the Buyer or its affiliates to the lender. Notwithstanding anything else herein to the contrary, an assignment set forth in items (1) through (4) of this Section 12 shall not be permitted, and shall require advanced written consent of the Seller, unless such assignee (by merger, operation of law or otherwise) expressly assumes the obligations and liabilities of the Seller hereunder. In the event of a liquidation, bankruptcy, dissolution, winding up of the Buyer or any sale of the Buyer (by merger, consolidation or otherwise) or sale of the Purchased Assets, the Buyer hereby grants to Seller (or one of Seller’s designees) a right of first offer and right of last offer to acquire the Purchased Assets (“Acquisition Option”). The Buyer shall provide the Seller with at least ten (10) days’ notice of any event set forth in the preceding sentences (the “Acquisition Notice”). The Seller shall be able to exercise its Acquisition Option by providing the Buyer with notice of its election to exercise such Acquisition Option within fifteen (15) days following receipt of the Acquisition Notice.
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13. Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify the Agreement so as to affect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
14. Notices. All notices and other communications under this agreement must be in writing and given by first class mail, return receipt requested, nationally recognized overnight delivery service, such as Federal Express, or personal delivery against receipt to the party to whom it is given, in each case, at the party’s address set forth in this section 13 or such other address as the party may hereafter specify by notice to the other parties given in accordance with this section. Any such notice or other communication will be deemed to have been given as of the date the applicable delivery receipt for such communication is executed as received or in the case of mail, three days after it is mailed.
If to the Seller:
MusicPlay Analytics, LLC.
325 E 8th St, 606
Cincinnati, OH 45202
Attention: Eron Bucciarelli-Tieger, CEO If to the Buyer:
VNUE, INC.
104 W. 29TH Street 11th Floor
New York, New York 10001
Attention: Zach Bair, CEO
15. Miscellaneous. This agreement contains the entire agreement between the parties with respect to the subject matter hereof and all prior negotiations, writings, and understandings relating to the subject matter of this agreement are merged in and are superseded and canceled by, this agreement. This agreement may not be modified or amended except by a writing signed by the parties. This agreement is not intended to confer upon any person or entity not a party (or their successors and permitted assigns) any rights or remedies hereunder. This agreement may be signed in any number of counterparts, each of which will be an original with the same effect as if the signatures were upon the same instrument, and it may be signed electronically. The captions in this agreement are included for convenience of reference only and will be ignored in the construction or interpretation hereof. If any date provided for in this agreement falls on a day which is not a business day, the date provided for will be deemed to refer to the next business day. Any provision in this agreement that is held to be invalid, illegal, or unenforceable in any respect by a court of competent jurisdiction will be ineffective only to the extent of such invalidity, illegality, or unenforceability without affecting in any way the remaining provisions hereof; provided, however, that the parties will attempt in good faith to reform this agreement in a manner consistent with the intent of any such ineffective provision for the purpose of carrying out such intent. The Exhibits and Schedules to this agreement are a material part of this agreement and are incorporated by reference herein.
[Signature page follows.]
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Each of the undersigned has caused this bill of sale and assignment and assumption agreement to be duly executed and delivered as of the date first written above.
| BUYER: | ||
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| VNUE, Inc. |
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| By: |  | |
| Name: | Zach Bair | |
| Title: | CEO | |
| SELLER: |
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| MusicPlay Analytics, LLC |
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| By: | |
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| Name: | Eron Bucciarelli-Tieger |
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| Title: | CEO |
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Schedule 1
Purchased Assets
“Purchased Assets” means all of Seller’s right, title and interest in, to and under the following assets of Seller, to the extent that such assets exist as of the Effective Time and exclusively relate to the Business, but specifically excluding the Excluded Assets:
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| a) | all books, records, mailing lists, customer lists, advertising and promotional materials, equipment and/or software maintenance records, and all other documents used by the Seller in the Soundstr Business (whether in hard copy or electronic form); |
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| b) | All hardware developed and produced by Seller in storage within the US and China. |
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| c) | all web and mobile code and all backups; d) all web and mobile code repository logins; e) all database and database logins; |
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| f) | FTP and hosting account information; |
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| g) | any and all relevant documentation; |
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| h) | the trade name “Soundstr” and associated goodwill and all copyrights, patents, trademarks, trade secrets, and other intellectual property and associated goodwill (the “Intellectual Property Assets”); |
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| i) | the internet domain name www.soundstr.com and all variants owned by the Seller and/or used in the Business; |
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| j) | all social media accounts, including, without limitation Facebook, Google Plus, LinkedIn, Twitter and YouTube accounts, used in the Business; and |
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| k) | All software code developed, prepared and written to support the operation of the any and all Soundstr applications, together with any build tools (e.g., compilers, linkers and other related tools), compile/link scripts, logic diagrams, program comments, installation scripts and other documentation and tools necessary for an ordinarily skilled programmer to understand and be able to create ports, updates or other modifications to such software code, or to recompile the same into fully functioning object code. Mobile applications also include any and all patent, copyright, trade secret, trademark and other intellectual property and other rights of every kind in such mobile applications, including, without limitation, end-user data, screen shots, video clips, sound bites, summaries of and excerpts from the mobile applications and other related assets. |
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| l) | All content currently owned or licensed by Soundstr, related materials and intellectual property rights therein, including all supporting contracts and/or documentation representing the content. |
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| m) | the Assumed Contracts |
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“Excluded Assets” means all assets or properties of Seller and any of its Affiliates other than the Purchased Assets, including, without, limitation:
a) all cash, cash equivalents, bank accounts and securities of the Seller;
c) all contract or agreements of Seller that are not Assumed Contracts and Obligations;
e) the company seals, organizational documents, minute books, stock books, tax returns, books of account or other records having to do with the organization of Seller, all employee-related or employee benefit-related files or records, and any other books and records which Seller is prohibited from disclosing or transferring to Buyer under applicable law and is required by applicable law to retain;
f) all insurance policies of Seller and all rights to applicable claims and proceeds thereunder;
g) all tax assets (including duty and tax refunds and prepayments) of Seller or any of its affiliates; and
k) the rights which accrue or will accrue to Seller under this Agreement.
“Assumed Contracts and Obligations” means the following contracts that exist as of the Effective Time and exclusively relate to the Business: All user contracts, consumer users, email lists associated with users; online database users associated with the above, and specific debts that Buyer has agreed to resolve as part of this Agreement.
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Exhibit A to Schedule 1
Inventory
Soundstr Debt Breakdown
| PAST DUE |
| AMOUNT |
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| NOTES | ||
| D2M (Devices) |
| $ | 42,371.82 |
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| Aron Price (Contractor) |
| $ | 24,000.00 |
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| Syberry (Contractor) |
| $ | 18,878.00 |
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| Credit Card |
| $ | 17,694.14 |
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| Legal |
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| Loeb & Loeb |
| $ | 29,163.03 |
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| WHE |
| $ | 20,498.70 |
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| CincyTech (closing) |
| $ | 2,881.50 |
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| Thompson Hine |
| $ | 4,000.00 |
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| This is the amount that could vary from $2--‐4,000 | |
| Gracenote |
| $ | 75,000.00 |
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| Scroggins Grear |
| $ | 2,250.00 |
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| Tax Preparation 2016 | |
| SJ Meyer & Associates |
| $ | 1,000.00 |
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| Tax Preparation 2017 | |
| TOTAL |
| $ | 234,487.19 |
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Exhibit B to Schedule 1
Inventory
[See attached.]
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Schedule 2
Confidentiality
1. The Buyer shall hold the Confidential Information in confidence and shall not use the Confidential Information for any purpose other than in furtherance of the Buyer’s operation of the Business without the Seller’s express written consent. The Seller and the Buyer recognize that Confidential Information involves one of the Seller’s valuable and unique assets. “Confidential Information” means information directly or indirectly involving the Business that is not available or open to the public generally and any information regarding the Seller that the Buyer has obtained during the course of the transaction.
2. The Seller and the Buyer each has carefully read and considered the provisions of this Schedule 2 and, having done so, agrees that the restrictions set forth herein are fair and reasonable given the terms and conditions of this agreement, the nature of the Seller’s and its affiliates’ business, the area in which the Seller and its affiliates market their products and services, and the consideration being provided pursuant to this agreement. In addition, the Seller and the Buyer each specifically agrees that the length, scope, and definitions used in the covenant not to compete and other restrictions set forth in this Schedule 2 are fair and reasonable.
3. The Seller and the Buyer each acknowledges and agrees that its breach of any of the agreements in this Schedule 2 would result in irreparable damage and continuing injury to the Buyer. Therefore, in the event of any breach or threatened breach of such agreements, the Seller and the Buyer each agrees that the Seller will be entitled to an injunction from any court of competent jurisdiction enjoining such person or entity from committing any violation or threatened violation of those agreements.
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Schedule 3
Representations and Warranties of the Seller
1. Authority. The Seller warrants that it has the authority to execute this Agreement and has appropriate approval from the Seller’s board of directors.
2. Consents. The Seller is not required to obtain the consent of any party to a contract or any governmental entity in connection with the execution, delivery, or performance by it of this agreement or the consummation of the transactions contemplated in this agreement.
3. Compliance with Laws. With respect to the operation of the Business by the Seller before the Effective Time, the Seller and its employees and officers are and at all times have been in compliance in all material respects with each law applicable to the Seller or to the operation of the Business.
4. Litigation. There are no claims or suits pending or, to the Seller’s knowledge, threatened by or against the Seller (1) relating to or affecting the Purchased Assets or (2) by or against any employee of the Seller relating to or affecting the Business or Purchased Assets. There are no judgments, decrees, orders, writs, injunctions, rulings, decisions, or awards of any court or governmental body to which the Seller is a party or is subject with respect to any of the Purchased Assets is subject.
5. Financial Information; Ordinary Course. The financial information the Seller provided to the Buyer is accurate, correct, and complete, is in accordance with the books and records of the Seller, and presents fairly the results of operation and financial condition of the Seller’s Business. The Seller has operated the Business in the ordinary course before the Effective Time.
6. Title; Condition of Purchased Assets. The Seller has good and marketable title to all of the Purchased Assets free and clear of all liens and encumbrances. Pursuant to this agreement, the Seller conveys to the Buyer good and marketable title to all of the Purchased Assets, free and clear of all liens and encumbrances, except for the assumed Contracts and Obligations. The Inventory is salable in the ordinary course of business and consists of items that are current, standard, and first-quality. All equipment and signs are in working order and the premises will pass all inspections necessary to conduct the Business.
7. Product Warranties. The Seller provides no express or implied warranty, indemnification, or guarantee to any of its customers at any time in excess of the warranty provided by the applicable product manufacturer. Each product sold or service rendered by the Seller is and has been sold or rendered, as applicable, in conformity with all applicable contractual commitments and all express and implied warranties, and the Seller does not have any liability (and there is no basis for any present or future proceeding) for replacement or repair thereof or other damages, liabilities, or obligations in connection therewith.
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Schedule 4
Representations and Warranties of the Buyer
1. Authority. The Buyer warrants that it has the authority to execute this Agreement and has appropriate approval from the Buyer’s board of directors and has obtained all other requisite corporate approvals to enter into this Agreement and consummate the transaction contemplated hereunder. Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the state of Nevada.
2. Consents; No Conflicts. The Buyer is not required to obtain the consent of any party to a contract or any governmental entity in connection with the execution, delivery, or performance by it of this agreement or the consummation of the transactions contemplated in this agreement. The execution, delivery and performance by Buyer of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not: (a) result in a violation or breach of any provision of the certificate of incorporation or by-laws of the Buyer; (b) result in a violation or breach of any provision of any law or governmental order applicable to the Buyer.
3. Compliance with Laws. With respect to the operation of the Business by the Seller before the Effective Time, the Seller and its employees and officers are and at all times have been in compliance in all material respects with each law applicable to the Seller or to the operation of the Business.
4. Solvency. Immediately after giving effect to the transactions contemplated hereby, the Buyer shall be solvent and shall: (a) be able to pay its debts as they become due; (b) own property that has a fair saleable value greater than the amounts required to pay its debts (including a reasonable estimate of the amount of all contingent liabilities); and (c) have adequate capital to carry on its business. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated hereby with the intent to hinder, delay or defraud either present or future creditors of the Buyer or the Seller. In connection with the transactions contemplated hereby, the Buyer has not incurred, nor plans to incur, debts beyond its ability to pay as they become absolute and matured.
5. Legal Proceedings. There are no actions, suits, claims, investigations or other legal proceedings pending or, to the Buyer’s knowledge, threatened against or by the Buyer or any affiliate of the Buyer that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.
6. Independent Investigation. The Buyer has conducted its own independent investigation, review and analysis of the Business and the Purchased Assets, and acknowledges that it has been provided adequate access to the personnel, properties, assets, premises, books and records, and other documents and data of Seller for such purpose. The Buyer acknowledges and agrees that: (a) in making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, the Buyer has relied solely upon its own investigation and the express representations and warranties of Seller set forth on Schedule 3 of this Agreement; and (b) neither the Seller nor any other individual or entity has made any representation or warranty as to the Seller, the Business, the Purchased Assets or this Agreement, except as expressly set forth on Schedule 3 of this Agreement.
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EXHIBIT 10.4
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EXHIBIT 10.5
EXHIBIT 10.6
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EXHIBIT 10.7
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EXHIBIT 10.8
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
| Principal Amount: $165,000 |
| Issue Date: February 16, 2021 |
| Purchase Price: $150,000 |
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CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED, VNUE, Inc., a Nevada corporation (hereinafter called the “Borrower” or “Company”), hereby promises to pay to the order of GHS Investments LLC, a Nevada limited liability company, or its registered assigns (the “Holder”), the sum of $165,000, together with any interest as set forth herein, on November 16, 2021 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the funding date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may be prepaid in whole or in part as explicitly set forth herein. Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 360-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock, $0.0001 par value per share (the “Common Stock”), in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (as amended and/or restated from time to time, the “Purchase Agreement”).
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This Note is being issued with a ten percent (10%) issuance discount (“OID”).
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
Each of the undersigned hereby affirms all of their obligations to the other under all of the Transaction Documents and agrees and affirms as follows: (i) that as of the date hereof, the undersigned have performed, satisfied and complied in all material respects with all the covenants, agreements and conditions under each of the Transaction Documents to be performed, satisfied or complied with by the undersigned; (ii) that the undersigned shall continue to perform each and every covenant, agreement and condition set forth in each of the Transaction Documents and this Note, and continue to be bound by each and all of the terms and provisions thereof and hereof; (iii) that as of the date hereof, no default or Event of Default has occurred or is continuing under the Purchase Agreement or any other Transaction Documents, and no event has occurred that, with the passage of time, the giving of notice, or both, would constitute a default or an Event of Default under the Purchase Agreement or any other Transaction Documents; and (iv) that as of the date hereof, no event, fact, or other set of circumstances has occurred which could reasonably be expected to have, cause, or result in a Material Adverse Effect.
Each of the undersigned hereby acknowledges, represents, warrants and confirms to the other that: (i) each of the Transaction Documents executed by it are valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms; and (ii) no oral representations, statements, or inducements have been made by Holder, or any agent or representative of Holder, with respect to this Note, any other Note, the Purchase Agreement, and all other Transaction Documents.
The following terms shall apply to this Note:
ARTICLE I. CONVERSION RIGHTS
1.1 Conversion Right. The Holder shall have the right at any time to convert all or any part of the outstanding and unpaid principal, interest, fees, or any other obligation owed pursuant to this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the Conversion Price (as defined below) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended(the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) (the numerator) by the applicable Conversion Price then in effect on the date specified in the notice of conversion (the denominator), in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, provided however, that the Borrower shall have the right to pay any or all interest in cash plus (3) at the Holder’s option, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (3) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.
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1.2 Conversion Price.
1.2 Conversion Price. Subject to the adjustments described herein, and provided that no Event of Default (as defined in Article III) has occurred, the Conversion Price shall equal $.0171 (fixed price equaling 90% of the lowest VWAP for 10 days preceding the Issue Date) (the “Fixed Conversion Price”), subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events. Notwithstanding anything herein to the contrary, upon delivery by the Holder to the Borrower of a Default Notice (as defined herein) setting forth the Event of Default under the Note, the Default Conversion Price (as defined below) shall immediately and irrevocably be effective. The “Default Conversion Price” shall mean the lesser of : (a) the Fixed Conversion Price or (b) 80% multiplied by the Market Price (as defined herein) (representing a discount rate of 20%). “Market Price” means the average Trading Price (as defined below) for the Common Stock during the twenty (20) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the lesser of: (a) the average trade price on the Over-the-Counter Bulletin Board (the “OTCBB”), OTCQB or applicable trading market as reported by a reliable reporting service (“Reporting Service”) designated by the Holder or, if the OTCBB is not the principal trading market for such security, the trading price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no trading price of such security is available in any of the foregoing manners, the average of the trading prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc., or (b) the closing bid price on the OTCBB, OTCQB or applicable trading market as reported by a Reporting Service designated by the Holder or, if the OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc. To the extent the Conversion Price of the Borrower’s Common Stock closes below the par value per share, and the Holder does not exercise its right provided below to treat the Conversion Price to equal the par value per share, the Borrower will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Borrower agrees to honor all conversions submitted pending this adjustment. If the shares of the Borrower’s Common Stock have not been delivered within three (3) business days to the Holder, the Notice of Conversion may be rescinded. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the Holder of the Note being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCBB, OTCQB or on the principal securities exchange or other securities market on which the Common Stock is then being traded. If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price not been adjusted by the Holder to the par value price.
(a) Pro Rata Conversion; Disputes. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Borrower shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with this Agreement.
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1.3 Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved three times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time) (the “Reserved Amount”). The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Note shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note. Notwithstanding the foregoing, in no event shall the Reserved Amount be lower than the initial Reserved Amount, regardless of any prior conversions.
Borrower’s failure to maintain or to replenish the Reserved Amount within three (3) business days of a written request of the Holder, shall be an Event of Default under the Note.
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1.4 Method of Conversion.
(a) Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 5:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.
(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Company shall, prima facie, be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
(c) Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.
(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates (or electronic shares via DWAC transfer, at the option of Holder, if such transfer is permitted under applicable securities laws and the Company is a participant in the such system) for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.
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(e) Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 5:00 p.m., New York, New York time, on such date.
(f) Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided that there are no restrictions under applicable securities laws and the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal At Custodian (“DWAC”) system.
(g) Failure to Deliver Common Stock Prior to Delivery Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock until the Borrower issues and delivers a certificate to the Holder or, if there are no restrictions under applicable securities laws, credit the Holder's balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon such Holder's conversion of any Conversion Amount (under Holder's and Borrower's expectation that any damages will tack back to the Issue Date). Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), and if not then paid, shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.
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(h) Rescindment of a Notice of Conversion. If (i) the Borrower fails to respond to Holder within one (1) business day from the Conversion Date confirming the details of Notice of Conversion, (ii) the Borrower fails to provide any of the shares of the Borrower’s Common Stock requested in the Notice of Conversion within three (3) business days from the date of receipt of the Note of Conversion, (iii) the Holder is unable to deposit the shares of the Borrower’s Common Stock requested in the Notice of Conversion for any reason related to the Borrower’s standing, (v) at any time after a missed Deadline, at the Holder’s sole discretion, or (vi) if OTC Markets changes the Borrower's designation to ‘Limited Information’ (Yield), ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull & Crossbones), ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign) or other trading restriction on the day of or any day after the Conversion Date, the Holder maintains the option and sole discretion to rescind the Notice of Conversion (“Rescindment”) with a “Notice of Rescindment.”
1.5 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Holder who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
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| “NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.” |
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The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be reasonably accepted by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act.
1.6 Effect of Certain Events.
(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.
(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion thereof, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
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(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.
(d) Adjustment Due to Dilutive Issuance. If, at any time when this Note is issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, except for shares of Common Stock issued directly to vendors or suppliers of the Borrower in satisfaction of amounts owed to such vendors or suppliers (provided, however, that such vendors or suppliers shall not have an arrangement to transfer, sell or assign such shares of Common Stock prior to the issuance of such shares), any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.
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The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options. The foregoing shall not apply to any Convertible Securities or Options outstanding prior to the date hereof.
Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.
(e) Purchase Rights. If, at any time when this Note is issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(f) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.
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1.7 Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note, this will be considered an Event of Default under Section 3.2 of the Note.
1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this Note.
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1.9 Prepayment. Notwithstanding anything to the contrary contained in this Note, the Borrower may prepay the amounts outstanding hereunder pursuant to the following terms and conditions:
(a) At any time during the period beginning on the Issue Date, the Borrower shall have the right, exercisable on not less than ten (10) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 112%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note.
Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the applicable prepayment amount to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower delivers an Optional Prepayment Notice and fails to pay the applicable prepayment amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.
ARTICLE II. CERTAIN COVENANTS
2.1 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.
2.2 Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.
2.3 Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date hereof, (b) indebtedness to trade creditors financial institutions or other lenders incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to repay this Note.
2.4 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
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2.5 Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.
2.6 Section 3(a)(9) or 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(l0) of the Securities Act (a “3(a)(l0) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(l0) Transaction while this Note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than Fifteen Thousand Dollars ($15,000), will be assessed and will become immediately due and payable to the Holder at its election in the form of cash payment or added to the balance of this Note.
2.7 Preservation of Existence, etc. The Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
2.8 Non-circumvention. The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
2.9 Repayment from Proceeds. While any portion of this Note is outstanding, if the Borrower receives cash proceeds from any source or series of related or unrelated sources, including but not limited to, from payments from customers, the issuance of equity or debt, the conversion of outstanding warrants of the Borrower, the issuance of securities pursuant to an equity line of credit of the Borrower or the sale of assets, the Borrower shall, within one (1) business day of Borrower’s receipt of such proceeds, inform the Holder of such receipt, following which the Holder shall have the right in its sole discretion to require the Borrower to immediately apply all or any portion of such proceeds to repay all or any portion of the outstanding amounts owed under this Note. Failure of the Borrower to comply with this provision shall constitute an Event of
Default. In the event that such proceeds are received by the Holder prior to the Maturity Date, the required prepayment shall be subject to the terms of Section 1.9 herein.
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ARTICLE III. EVENTS OF DEFAULT
If any of the following events of default (each, an “Event of Default”) shall occur:
3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.
3.2 Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty-eight (48) hours of a demand from the Holder.
3.3 Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement.
3.4 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
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3.5 Receiver or Trustee. The Company or any subsidiary of the Company shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
3.6 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company or any subsidiary of the Company or the Borrower admits in writing its inability to pay its debts generally as they mature, or have filed against it an involuntary petition for bankruptcy.
3.8 Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB, OTCQB, OTC Pink or an equivalent replacement exchange, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE American.
3.9 Failure to Comply with the Exchange Act. The Borrower shall fail to timely comply with the reporting requirements of the Exchange Act (including but not limited to becoming delinquent in its filings); and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.
3.10 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.11 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.12 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future) or any disposition or conveyance of any material asset of the Borrower.
3.13 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
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3.14 Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.
3.16 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
3.17 Cessation of Trading. Any cessation of trading of the Common Stock on at least one of the OTCBB, OTCQB, OTC Pink or an equivalent replacement exchange, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE American, and such cessation of trading shall continue for a period of five consecutive (5) Trading Days.
3.18 Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any material covenant or other term or condition contained in any of the Other Agreements, other than any such breach or default which is cured by agreement of the parties, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the agreements and instruments defined as the Transaction Documents. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.
3.19 Bid Price. The Borrower shall lose the “bid” price for its Common Stock ($0.0001 on the “Ask” with zero market makers on the “Bid” per Level 2) and/or a market (including the OTCBB, OTCQB or an equivalent replacement exchange).
3.20 OTC Markets Designation Markets changes the Borrower’s designation to ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull and Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign).
3.21 Inside Information. Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date.
3.22 Unavailability of Rule 144. If, at any time on or after the date which is six (6) months after the Issue Date, the Holder is unable to (i) obtain a standard “144 legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage firm (and respective clearing firm), and the Borrower’s transfer agent in order to facilitate the Holder’s conversion of any portion of the Note into free trading shares of the Borrower’s Common Stock pursuant to Rule 144, and (ii) thereupon deposit such shares into the Holder’s brokerage account.
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Upon the occurrence of any Event of Default specified in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10,3.11, 3.12, 3.13, 3.14, 3.15, 3.16. 3.17, 3.18, 3.19, 3.20, 3.21, and/or 3.22 exercisable through the delivery of written notice to the Borrower by such Holder (the “Default Notice”), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”), on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) at the option of the Holder, the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Trading Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.
The Holder shall have the right at any time, to require the Borrower to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect, subject to the terms of this Note. This requirement by the Borrower shall automatically apply upon the occurrence of an Event of Default without the need for any party to give any notice or take any other action.
If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Borrower for its reasonable attorneys' fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
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4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Borrower, to:
VNUE, Inc.
104 W. 29th Street
11th Floor
New York, NY 10001
Attn: Zach Bair, Chief Executive Officer
Email: zach.bair@vnue.com
If to the Holder:
GHS Investments LLC
420 Jericho Turnpike, Suite 102
Jericho, New York 11753
4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.
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4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Neither the Borrower nor the Holder shall assign this Note or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder or to any of its “affiliates”, as that term is defined under the 1934 Act, with the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bonafide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.
4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York, in the federal courts located in the District of the State of New York, or in such other jurisdiction and venue as the Holder may determine in its sole discretion. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.
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4.8 Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.
4.9 Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9 including, but not limited to, name changes, recapitalizations, etc. as soon as possible under law.
4.10 Usury. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Borrower covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any usury law that would prohibit or forgive the Borrower from paying all or a portion of the principal or interest on this Note.
4.11 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required. No provision of this Note shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
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4.12 Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.
4.13 Dispute Resolution. In the case of a dispute as to the determination of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum, Closing or Maturity Date, the closing bid price, or fair market value (as the case may be) or the arithmetic calculation of the Conversion Price or the applicable prepayment amount(s) (as the case may be), the Borrower or the Holder shall submit the disputed determinations or arithmetic calculations via facsimile (i) within two (2) Business Days after receipt of the applicable notice giving rise to such dispute to the Borrower or the Holder or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Borrower are unable to agree upon such determination or calculation within two (2) Business Days of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Borrower or the Holder, then the Borrower shall, within two (2) Business Days, submit via facsimile or email (a) the disputed determination of the Conversion Price, the closing bid price, the or fair market value (as the case may be) to an independent, reputable investment bank selected by the Borrower and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum to an independent, outside accountant selected by the Holder that is reasonably acceptable to the Borrower. The Borrower shall cause at its expense the investment bank or the accountant to perform the determinations or calculations and notify the Borrower and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation shall be binding upon all parties absent demonstrable error.
4.14 Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note (other than a future financing with the Holder), then the Borrower shall notify the Holder of such additional or more favorable term and such term, at Holder’s option, shall become a part of the transaction documents with the Holder. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, prepayment rate, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage.
[signature page follows]
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IN WITNESS WHEREOF, each of the undersigned has caused this Note to be signed in its name by its duly authorized officer as of the date first above written.
| VNUE, INC. | |||
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| Name: | Zach Bair | |
| Title: | CEO | ||
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| GHS Investments, LLC |
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EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby elects to convert $___________ principal amount of the Note (defined below) together with $_____________ of accrued and unpaid interest thereto, totaling $_______ into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of VNUE, Inc., a Nevada corporation (the “Borrower”), according to the conditions of the convertible note of the Borrower dated as of __, 20__ (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
| ☐ | The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal At Custodian system (“DWAC Transfer”). |
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| ☐ | The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: |
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EXHIBIT 10.9
EXHIBIT 10.10
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| THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (fHE "ACT") OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. |
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AMENDMENT TO ORIGINAL SECURED CONVERTffiLE PROMISSORY NOTE
It is hereby recalled and ratified by the parties that the parties entered into the Original Secured Convertible Promissory Note dated May 9, 2016 by and between Vnue, Inc., a Nevada corporation ("Borrower") and Ylimit, LLC, a Texas limited liability company ("Lender"), in the original principal sum of One Hundred Thousand and No/100 Dollars ($100,000.00), with interest from the date of advancement on the unpaid balance hereof from time to time remaining unpaid at a rate of ten percent (10%) simple interest per annum (the "Original Note"); and that several Amendments have since been executed(the last one being July 16, 2020), resulting in a principal sum of $1,167,208.00 USD. Borrower has requested Lender extend the note maturity until February 09, 2022, and Lender hereby agrees to do so upon the terms of this Amended Note herein contained and for the additional consideration described herein.
Lender and Borrower hereby agree that the principal of this Amendment to Original Secured Convertible Promissory Note shall mature and be due and payable on February 09, 2022, and shall increase in the amount of $168,500.00 USD, resulting in a new principal sum of $1,335,708.00 USD. All accrued and unpaid interest shall be payable upon the maturity of the principal of this Note.
Lender and Borrower hereby agree that this Amendment to Original Secured Convertible Promissory Note shall be effective upon execution by both parties.
1. Consideration for this Amendment. The consideration for this Amendment shall be the party's mutual promises as expressed herein.
2. All Other Provisions of the Original Note and Subsequent Amendments. Borrower and Lender hereby agree that all other terms of the Original Secured Convertible Promissory Note and subsequent Amendments shall also apply to this Amendment including, but not limited to, the security interest granted to Lender and that all terms of the Original Secured Convertible Promissory Note and subsequent Amendments are hereby incorporated herein by this reference and remain in full force and effect as if originally contained herein. Should any term of this Amendment be deemed in conflict with any term contained in the Original Secured Convertible Promissory Note or subsequent Amendments, then the terms of this Amendment to Original Secured Convertible Promissory Note shall control.
THIS AMENDMENT REPRESENTS THE FINAL AGREEMENT BETWEEN BORROWER AND LENDER CONCERNING THE MATTERS HEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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IN WITNESS WHEREOF, the undersigned have executed this Amended Note on and as of the 15th day of January, 2021.
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| Title: | Chief Executive Officer | ||
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| By: |
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| Name: | Gary Blum |
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| Title: | Managing Member |
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EXHIBIT 10.11
EXHIBIT 10.12
[ ] 2020 TOUR – W – VNUE
TERM SHEET
WHAT
VNUE, Inc, will record and produce live recording for each of the tour dates on the [ ] Tour, and will offer limited edition products for sale on-site at the venue and worldwide via our websites, subject to the approval of the recording in all respects by [ ]. VNUE will provide all equipment and personnel to execute.
PRODUCT CONFIGURATION
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| · | Double CD sets via DiscLive, retail price $[ ] |
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| · | Download cards, retail price $[ ] |
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| · | Digital downloads via set.fm, retail price $[ ] |
ADDITIONAL SALES CHANNELS
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| · | Double CD set to be offered via [ ] as an “Add-on” at checkout. Retail price to customer, $[ ] – net to VNUE/[ ] @ $[ ]. |
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| · | Download Card via [ ] packages, net to VNUE/[ ] @ $[ ] |
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| · | All monies paid directly to VNUE, unless otherwise agreed. |
FINANCIAL CONSIDERATION
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| · | $[ ] K USD Advance to [ ] against [ ] % of Net Sales of all VNUE products, provided VNUE is included in initial and subsequent announcements and all reasonable marketing. |
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| O | [ ] % to [ ], Inc., and [ ] % to [ ] |
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| O | $[ ] K due no later than Jan 10th, 2020 |
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| O | $[ ] due no later than March 1st, 2020 |
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| · | “Net Sales” mean the aggregate sum of all actual, out-of-pocket third party expenses paid by VNUE as mutually pre-approved by the parties in connection with the VNUE Concert Masters, the Concert Albums and the exploitation of the same including without limitation: (a) all sums payable or costs incurred by VNUE with respect to the Concert venues; (b) the recording and production of the Concert Masters; (c) the Concert Albums, the artwork, and other materials including, but not limited to in-venue posters or handbill fliers); (d) all shipping and storage costs; (f) all credit card or mobile provider service fees; (g) all taxes; (h) all payments to music publishers, venues, and unions and/or union members; (i) all VNUE marketing, promotion, publicity and merchandising materials and expenses, including but not limited to online media, advertising materials, and in-venue materials; and (j) all transportation, accommodation and meal expenses for designated VNUE personnel assigned to the tour by VNUE. Accounting updates will be provided in writing by VNUE to [ ] every 30 days during the tour, and a final full accounting of each territory’s tour leg will be delivered within 15 business days of the final tour date of that leg. Accounting will be subject to audit by [ ]. [ ] may terminate this agreement for breach by VNUE of its obligations hereunder if such breach is not cured within (5) business days after written notice to VNUE. |
Understood and Agreed:
| VNUE, Inc. |
| Artist’s Rep (or Artist) |
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| By: | /s/ Zach Blair | By: | /s/ | ||
| Name: | Zach Bair | Name: | |||
| Title: | CEO | Title: | |||
| Date: | Jan 9th, 2020 |
| Date: |
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EXHIBIT 10.13
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EXHIBIT 21.1
Significant Subsidiaries of
VNUE, Inc.
| Name of Subsidiary, Ownership % | Jurisdiction |
| VNUE, Inc. f/k/a TGRI (100%) | Nevada |
| VNUE, Inc. (100%) | Washington |
| VNUE, LLC (100%) | Washington |
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation in this Registration Statement on Form S-1 of our report dated April 8, 2021, relating to the financial statements of VNUE, Inc., as of December 31, 2020 and to all references to our firm included in this Registration Statement.
Certified Public Accountants
Lakewood, CO
June 17, 2021